Understanding the Purchase Agreement
A purchase agreement is a legally binding document that outlines the terms of your offer.
Key Components of an Offer
- Purchase Price: The amount you're offering to pay for the property
- Earnest Money Deposit (EMD): Good faith deposit showing you're serious (typically 1-3%)
- Financing Terms: Loan type, down payment amount, pre-approval details
- Contingencies: Conditions that must be met for the sale to proceed
- Closing Date: When ownership will transfer (typically 30-45 days)
- Seller Concessions: Any credits you're requesting from the seller
Offer Strategies for Competitive Markets
In a seller's market with multiple offers, you need tactics to stand out:
Escalation Clause
Automatically increases your offer up to a maximum if competing offers come in higher.
Appraisal Gap Coverage
Agree to cover the difference if the home appraises below your offer price.
Shortened Contingency Periods
Reduce inspection period from 14 days to 7-10 days to show you can move quickly.
Flexible Closing Date
Offer the seller their preferred closing date, or offer a rent-back period.
Best Practice: Always discuss escalation clauses and appraisal gap coverage with your agent before including them.
Understanding Contingencies
Contingencies protect you as a buyer, but they also affect how attractive your offer is to sellers.
Common Contingencies
- Inspection Contingency: Allows you to inspect the property and negotiate repairs or walk away
- Financing Contingency: Protects you if your loan falls through
- Appraisal Contingency: Protects you if the home doesn't appraise at the purchase price
- Sale of Home Contingency: Makes your purchase contingent on selling your current home
Caution: Waiving contingencies can make your offer more competitive, but increases your risk.
Earnest Money: Show You're Serious
Earnest money is held in escrow and applied to your down payment at closing. A larger deposit signals commitment.
- Standard amount: 1-3% of purchase price in St. Louis market
- Competitive amount: 3-5% to stand out in multiple offer situations
- Protection: EMD is refundable if you cancel within contingency periods