Once you've found a home you want to buy, you'll need to negotiate a price with the seller and agree to a purchase contract.

Making an Offer

Unlike many major purchases which have a specific price tag, homes sell for whatever amount the buyer and seller negotiate. Your real estate agent or legal counsel should help you determine the best amount for your initial offer. When you make the offer, keep these things in mind:

• Put it in writing. All negotiations should be handled in writing—not verbally—to ensure that there is a clear understanding between the parties. If you must negotiate verbally, at least follow up in writing.
• Have your preapproval from your lender to give you maximum leverage. Sellers usually prefer offers from buyers whose financing is already secured.
• Be prepared to submit an earnest money deposit (also called a "good faith" deposit) to show your commitment to the transaction. This deposit, the amount of which varies by locality, will go into an escrow account until the transaction is complete.

The Contract

The purchase contract, or purchase agreement, is a signed agreement between the buyer and seller describing all the terms of the transaction. Like other contracts, this document represents a legally binding agreement, so approach it with care. Depending on what state you live in, an attorney, real estate agent, or title company may help negotiate and draft the contract. Purchase agreements typically include these items:

• The home address and legal description of the property.
• The sales price and the amount of the loan, down payment, and deposit.
• The names of both parties and their respective agents, brokers, or attorneys.
• Any applicable time limits. These may apply to the buyer's acquisition of financing, the seller's response to the offer, the closing, or the transition of occupancy.
• Any conditions or contingencies that must be met in order to complete the transaction. For example, the contract may be contingent on the buyer's ability to obtain financing, the home being appraised at a certain value, the results of a home inspection, or the sale of the buyer's current home.

Remember that no two real estate transactions are exactly alike. Buyers and sellers bring different backgrounds, interests, and agendas to the negotiating table, and the purchase contract will reflect those differences.