You have found the house you want! Now what do you do?

If you have done your homework, you will be familiar with the location, know whether the floor plan will work for your family, and have a list of repairs or improvements that may need to be made. Now you should be able to determine how much you are willing to offer for the house. You need to set a limit and stick with it.

The purchase process begins when you complete a form called an "offer to purchase." The offer to purchase lists things like the price you are willing to pay and other conditions of the sale. The offer to purchase is presented to the seller by your real estate agent.

Take this form very seriously because its conditions are legally binding! You can withdraw your offer only if the seller has not already signed it. If the seller accepts your conditions and signs the offer to purchase, the form becomes a sales contract. You cannot change any of the conditions of the sales contract without additional negotiations and possibly loss of money.

Standard forms make the process of preparing an offer easy and almost risk free. The standard form provides much of the legal language your offer should contain and identifies many of the items you will want to include. However, you must make many important decisions. If you have questions, consult a real estate attorney. It is easier and safer to consult an attorney while you are completing the offer to purchase than to try to correct mistakes after the sales contract has been drawn up and accepted.

Non-fixture Items-- List the items you want to be included in the house's sale. These non-fixtures may include curtains, appliances, and workbenches. Items that are physically and permanently attached usually are automatically included in the houseþs sale except when the seller specifically indicates these exclusions in the sales contract. It is best to specify any items you want included so there will be no misunderstanding.

Closing Date-- Your offer to purchase should also include your proposed closing date. On this date you will meet with the seller and formally purchase and pay for the house.

Life of the Offer-- The standard form includes a provision for you to specify how long the seller may take to respond to your offer. This prevents the seller from keeping you in suspense while waiting for a better offer.

Earnest Money-- In most cases, you will be expected to provide a deposit or earnest money payment with the offer. Five percent of the house's purchase price is an average amount for earnest money, though it could range from $500 to several thousand dollars. The check should be made to the real estate agent, who will keep the money in escrow until the negotiations are complete. Always get a signed receipt. Be sure your contract indicates that you, the buyer, will receive the interest on the down payment. And be sure that you will get your money back if the sale is not completed due to the seller or certain contingencies that you have written into the contract. If you decide to back out of the contract, you will probably forfeit the deposit to the seller.

Once you have completed and double-checked the contract, it is presented to the seller. If the seller accepts everything in the contract, including the price and all of the contingencies, the offer becomes binding on both the buyer and seller subject to the contingencies. If the seller wishes to negotiate, a counteroffer is made with either a new contract or with notations and substitutions made on the original document. You then receive the revised contract and can either sign it, if acceptable, or reject it and make a second offer. Most agreements are reached after several rounds of offers and counteroffers.

Watch what you say within earshot of either a real estate agent or a seller. Everything you say can, and will, be used in the bargaining process. For example, if you submit a contract with a figure lower than the asking price, don't let the seller's real estate agent know that you are willing to pay more. Never confide your negotiating strategy. A real estate agent is legally bound to the seller. The alternative is to use a buyer's broker or agent who will represent you, the buyer.

Don't respond to any suggestions or counteroffers unless they are presented in writing. For example, if a seller or his agent tells you that your offer is too low, insist on a written counter-proposal indicating the price (or other changes) that would make your offer acceptable. Don't feel pressured into raising your price on the spot.

If the seller agrees to make repairs (based on negotiations following a home inspection report), insist that they be done by contractors that you, the buyer, select and under your supervision. Otherwise the work could be poorly done with incompetent labor and/or inferior materials.

Never submit a contract to a buy a house after seeing it only once! Return for another look the following day or weekend, and again, if necessary. Visit the house immediately after a rain or heavy snow, if the weather cooperates, to see if there are visible water problems. Don't be embarrassed to revisit the houses you like most. Remember, you don't really "see" a house on the first visit but find yourself focusing on features like wallpaper, a great master bathroom, or garage space. You may have little or no memory or even an inaccurate impression of the rest of the house. Returning to the house several times will also give you an opportunity to engage the sellers in conversation about the neighborhood.

Try to get the seller to take over as many of the purchase and sale expenses as possible. Do not let tradition or custom get in your way. The fact that the "buyer always pays for the survey" does not mean the seller cannot pay for it. Keep in mind that Federal Housing Administration (FHA) and Veterans Administration (VA) loans do not allow the financing of points. Any points in financing these loans must be paid in cash by you or by the seller. A seller's willingness to negotiate may depend on the market and how anxious he or she is to sell. In a tight market or if the seller has to move, he or she may be willing to pay points.

Shop around for the best mortgage terms. The lender with the lowest interest rates may also have the highest closing costs. You may be able to negotiate with your lender to waive or reduce certain fees if the competition among lenders is strong.

Negotiate with attorneys on their fees. Most attorneys base their fees on a percentage of the price of the house. You may be able to negotiate an hourly rate with your attorney.

Negotiating to buy a house is the process of telling sellers and their real estate agent at what price and on what terms you are interested in their property. Expect to haggle by insisting on the price and conditions that you desire. Many buyers don't realize they are allowed to bargain on any feature of the deal, and traditional real estate professionals don't always tell them. This is where the services of a buyer's broker or agent can be valuable.

Question: We have just moved to the Washington area from California, and are looking to buy a house. The process here appears quite different from that of the West Coast, and we are very confused. Is there any language that should be included in the real estate contract that we may sign with the seller. Are there any important consumer protections which are applicable to real estate transactions.

Answer: Real estate practices differ widely throughout this country. Local customs and local legislation often dictate your rights. Unfortunately, there are very few real consumer protection laws which govern the purchase and sale of residential real estate. For all practical purposes, a buyer should keep in mind the Latin phrase "caveat emptor" -- let the buyer beware.

In the Washington, D.C. area, as an example, the buyer generally makes a written offer to the seller. The seller then has three options. The offer can be accepted in its entirety; the offer can be rejected in its entirety. More often than not, however, the offer is countered by the seller. This counter-offer then becomes a new offer to the buyer, who then has the same three choices.

Ultimately, we either reach a valid binding contract -- through a meeting of the minds -- or the negotiations are terminated and the buyer and the seller both go their separate ways.

There are standard real estate contracts available from real estate brokers or from stationary stores. By and large, these standard form contracts are acceptable, but they should be considered only as a minimum threshold of what should be included in any real estate contract.

Addenda are usually added, whereby the specific and individual needs and desires of the buyer and seller are incorporated into the final real estate contract.

In order to have a binding, valid contract, it must be in writing. Anything told to the buyer or the seller verbally will probably not be binding and will not become a part of the final contract. If the broker or one of the parties to the transaction makes certain representations, make sure that these are reduced to writing and signed by both seller and buyer.

Here are a few of the critical contract clauses which must be included in any real estate contract:

1. A home inspection contingency. There are two kinds of contingency clauses. One is a general clause which says that if the buyer is dissatisfied for any reason whatsoever with the home inspection, the contract can be declared null and void and the earnest money deposit will be returned to the buyer. The second type of clause is specific, whereby you have to advise the seller of your concerns within a certain period of time, and the seller has several days in which to decide whether or not to make the repairs.

My own preference is to use the general inspection clause. Such a clause would read as follows:

This contract is contingent upon the buyer having the right to engage a professional inspector to determine the structure and condition of the house. The inspection shall be conducted and the contingency concluded within five working days from the date of acceptance of this contract. The inspection report must be satisfactory to purchaser, or all deposit monies will be immediately refunded and all contract obligations considered null and void.

It should be noted that in recent years, the real estate industry in the Washington metropolitan area has started to use what is known as the Regional Sales Contract. One of the addenda forms to this new contract contains very good language regarding the home inspection contingency. It gives a buyer the choice of voiding the contract (i.e. the general inspection clause) or giving the seller the opportunity to make certain repairs (the specific clause). This addendum can be used for the inspection contingency.

2. Financing contingency: If the buyer needs to obtain a mortgage loan in order to purchase the property, the contract must contain language that the contract is contingent on the buyer obtaining the necessary financing. Most standard form contracts contain such a contingency. However, you should read the language carefully to make sure that if you are unable to get the necessary mortgage money after making a diligent effort to obtain financing, the contract can be voided by you (and not the seller) and your deposit will be immediately refunded.

It should be noted that the financing contingency language of the Regional Sales Contract is not a model of clarity, and buyers should make sure they fully understand the full impact of that language.

3. Property condition: Are you buying the property in as as is condition? If so, make sure you understand the timing of that condition. Is it "as is" of the day you signed the sales contract or "as is" on the day of settlement. There is a major difference. In my experience, I have encountered numerous hot water heaters, for example, that were fully operational when the contract was signed but on the day of settlement were not working.

Depending on the language of the sales contract, the buyer may not be able to require the seller to replace or repair that defective heater.

My preference is that every real estate contract should include the following language:

The plumbing, heating and electrical facilities (including any air conditioning units or systems) must be in working order at time of settlement.

If you are going to allow the seller to stay in the property for a period of time after settlement, then the contract should be modified to reflect that these items will be in working order at the time possession is given to the purchaser.

4. Settlement: The buyer has the right to determine the location and time for closing. The buyer has the absolute right to determine which title attorney or title company will conduct the settlement.

While you can get references from your real estate broker, keep in mind that you want someone who will be representing your interests, and not someone who is a "friend" of the seller or the broker.

5. Termite inspection: The seller must provide a letter from a reliable, licensed termite company that the property is free of active termite infestation and wood-boring insects. If termite damage is found, the seller will repair at his or her cost. If there is a garage or other structure in addition to the main house, make sure that the termite language covers all buildings on the property. It is to be noted that in some parts of the country the termite obligation falls on the buyer. In either event, many lenders will require an acceptable termite letter at settlement, and this has to be available before settlement.

It is my understanding that some lenders are no longer requiring a termite letter in order for a mortgage loan to be approved. That may be acceptable for a lender. In my opinion, it is not acceptable for a buyer. This is termite country, as are most places, and buyers should be satisfied that the house is free of active termite infestation.

6. Earnest money deposit: The earnest money deposit that you put down with the sales contract should be held in an interest-bearing, escrow (trust) account until settlement. If settlement takes place, the interest accrues for the benefit of the buyer.

The question is always raised as to how much is an acceptable earnest money deposit. Sellers obviously want as much as possible, since if the buyer defaults, the money would usually go to the seller.

Buyers, on the other hand, want to put down as little as possible.

A good rule of thumb is that the deposit should be at least five percent of the overall purchase price. If the broker is unwilling to put these funds in an interest-bearing account, the buyer should contact his or her lawyer, who can put the funds into an appropriate interest-bearing escrow account.

Under no circumstances should a buyer give the deposit directly to the seller to hold. If the title is inadequate, or if the buyer is unable to obtain financing, it may be very difficult to obtain a refund of the deposit, since presumably the seller may already have used those funds. An independent escrow account must be established for the earnest money deposit.

7. Items which do -- or do not -- convey: Are there any specific items which should be included with the property. For example, lawn furniture, air conditioning units, special lamp fixtures, ladders, or other such items. If there is something that the seller does not want to convey, it should be specifically written in the contract. Similarly, if there is something that the buyer wants to go with the house, it too should be reduced to writing. As indicated earlier, do not rely on verbal representations.

These are but a few of the important contract clauses which should be included in any real estate contract. Do not be pressured into signing the contract. You are committing yourself to a substantial investment, and you should be able to sit back and carefully review any legal document before it is signed. In fact, it is a good idea to have your own lawyer review the contract before it is finally signed.

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