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When you have found a property and are ready to make an offer, it is important to figure out the true market value of the property. In order to do this, you need to find out how much, similar properties, in the same area, are selling for. One source for this information is the Multiple Listing Service (MLS). This service lists all properties currently listing for sale and a history of prices of properties that have already sold. The MLS provides detailed descriptions of the # of bedrooms, bathrooms, square footage, age, monthly assessments, market timing, as well as a description of the property and its condition. Realtors will have access to the MLS and will be able to help you to formulate an offer. If you are not working with a realtor, an appraiser would be a good source to determine value.
Earnest Money - When you submit an offer, you should be prepared to make a deposit. This deposit is referred to as "earnest money" and is given as a show of good faith that you are sincere about your offer. If the sale goes through, your earnest money will be deducted from the amount you owe the seller at closing. The earnest money will be refunded if the sale has to be cancelled because you are unable to get a mortgage loan. The amount of the earnest money deposit is negotiable. This amount should be substantial enough so that the seller feels comfortable with taking the property off of the market. A larger deposit will show a seller that you are very serious about purchasing this property. You want to make sure your earnest money will be placed in an interest bearing account as this money will sit idle until you close on the home.
Attorney Review - Defined as the period of time in which your attorney can review, rewrite, and/or delete sections of the contract that he/she feels is not in your best interest. This period of time is typically between 5 to 10 days, and allows for amendments to the contact, as well as hiring a home inspector to make sure the home is structurally sound and that the appliances are in working order.
Tax proration - The seller of a property is going to credit you the amount of real estate taxes due on that property up to the day of closing. This amount is referred to as the "Tax Proration". When signing a contract it is common practice to make that proration based on 105% of the most recent ascertainable tax bill. This is to cover an increase in taxes.
Mortgage Contingency - This is a period of time allowed for you to obtain mortgage financing. Typically the time frame is 30 - 45 days from the date of the signed contract. Without this contingency you risk losing your earnest money in the event that you are unable to obtain financing.
Closing Date - The date by which legal possession of the property shall be delivered to the buyer.