Most home buyers and their real estate agents spend many hours finding the perfect home. But often too little effort is put into preparing the purchase offer. The agent often pulls out a standard purchase contract. But the truth is, there's no such thing. There are many different purchase forms printed by state and local Realtor associations, the local multiple listing service, real estate offices and form publishing companies.

Remember who wrote the printed form
Smart buyers, when starting their home search, will ask their agent for a blank copy of the purchase form the agent recommends. They should take it home to study. Most purchase offers were written by attorneys working for clients such as a brokerage office, a Realtor association, multiple listing service or other group with a vested interest. State law often mandates that certain clauses be in a purchase offer, but buyers and sellers are free to cross out and negotiate most terms of the offer. Just because a form is printed doesn't mean it contains terms to protect your best interests.
For example, some forms prepared by real estate brokers contain a paragraph obligating the broker, buyer and seller to arbitrate any dispute. If you agree in advance to arbitration of disputes, you give up your right to a court trial with a jury, right to appeal and rules of evidence. Challenging a biased arbitrator is virtually impossible.

Pretend a judge is looking over your shoulder
When I began acquiring real estate, a wise real estate broker told me, "Pretend a judge is looking over your shoulder when you write your purchase offer." He meant if worse comes to worst and a lawsuit becomes necessary, be sure the purchase contract can be understood by a judge. A vague or indefinite agreement is illusory and unenforceable.

Essential terms of a home purchase offer
Well-designed home purchase offer forms contain blanks for the names of the buyers, property address, purchase offer price and finance details. Other essential terms include:

1. Earnest money deposit. Legally, a good faith deposit is not required because once the buyer and seller sign the purchase agreement, a binding contract is formed. But few home sellers would accept an offer that doesn t include an earnest money deposit, since it enhances the chances the buyer will complete the purchase as agreed.
   The larger the buyer's deposit, the greater the probability the seller will accept the purchase offer. A big deposit check will often convince a reluctant seller to accept a low offer. As a rough guideline, the deposit should be 1 to 5 percent of the sales price.
   Be sure the deposit is not given to the seller, but is held either in the realty broker s trust account or by the party who will be handling the closing, such as an attorney, bank, escrow or title firm.

2. Liquidated damages clause. Many home purchase offers contain a liquidated damages clause. Since the exact damages will be hard to determine if the buyer defaults, the buyer and seller can agree in advance on the amount the buyer must pay to get out of the contract.
   Some state laws limit the maximum liquidated damages. For example, California sets the limit at the lesser of 3 percent of the sales price or the amount of the buyer's good faith deposit.

3. Professional inspection contingency clause. Smart home buyers insist on their approval of a report by a professional home inspector. Many buyers of even brand-new houses now insist on hiring a professional inspector to check for faulty construction. It's best for the home buyer to accompany the inspector to discuss any defects discovered that the seller did not previously disclose.
   In most states, home sellers must now disclose in writing any serious material defects in the residence. If the seller refuses to pay to have serious defects corrected, the buyer can disapprove the inspector s report, cancel the sale and get the earnest money deposit refunded.

4. Finance contingency clause. If not already part of the finance clause, a perfect purchase offer contains a contingency clause for obtaining the necessary mortgage. Smart home buyers obtain mortgage preapproval (not just prequalification) before shopping for a home. But even preapproved mortgages are contingent on a satisfactory appraisal, so a finance contingency clause is almost always needed in case the home doesn't appraise for the price offered.

5. Personal property clause. Personal property items on the premises that are not permanently attached to the structure, such as free-standing kitchen appliances, are not included in the home sale. If you want any personal property included, be sure to itemize it in the purchase offer even if the listing agent says they are included.

6. An all-inclusive weasel clause. Although the professional inspection and financing contingency clauses usually safeguard home buyers, you might wish to include an all-inclusive weasel clause. Such a clause might read: This purchase offer is contingent on the buyer's attorney approving this purchase contract within 10 days after the seller s acceptance. This gives you a free look while your attorney, CPA or other trusted advisor reviews the purchase contract. To avoid wasting time and money, it's best to have the contract reviewed after it is accepted by the seller.

Writing a perfect purchase offer isn't difficult if you start with a well-written printed form. Be sure it contains, or add, the essential clauses discussed above. The time to become familiar with the purchase offer is well before you find the right home, which you want to offer to buy. Don't hesitate to consult a real estate attorney for further information.