Making an offer on SFH with a "30 day study period" clause?

10 Replies

Hello

My agent suggested I make an offer on a single family home with a "30 day study period" clause.  She said this would give me time to go to the county and do my homework, and if things didn't work out with the county I could bail on the offer.

Wanted to get thoughts from anyone who's used "study period" in their offers before.  I haven't heard of such a clause.

Miz

I think you should find a new agent.

Sellers do some crazy things sometimes so someone may be ok with it but the majority of sellers would likely laugh at that offer.

@Lynn M.  

@James Wise

thanks for your advice to this newbie.   Would you guys mind elaborating a little so I can understand why that is laughable or why I should find a new agent?

Thanks

Miz

I am also an agent and I have never heard of a "study" period.  I believe she is referring to an "option" period. I find it strange the agent is not using the proper term.

I also have not heard of a "study" clause. Is your agent referring to a "Due Diligence" Clause? This is clause is common and will protect you as you do some research of the property. You may not get the 30 days but most sellers will allow 21 days, which is also enough time to secure your financing.

Hope this helps.

Originally posted by @Manish A. :

@Lynn M.  

@James Wise

thanks for your advice to this newbie.   Would you guys mind elaborating a little so I can understand why that is laughable or why I should find a new agent?

Thanks

Miz

A seller is not going to want to let you tie up their property for 30 days for such an open ended clause.

If I am selling you the property I am going to tell you to go to the county and do your homework, when your homework is done make me an offer.

You can submit an offer with specific clauses. If you want to do a home inspection that is fine as long as it is done in a reasonable amount of time. Usually 3-10 days.

If it is a financing contingency sellers are looking for a pre-approved buyer with the only out being inability to get said financing.

30 days to kick the dirt around makes no sense from a selling standpoint.

 You are basically asking someone to tie up the sale of their home for a month so you can decide if you're serious or not, with no penalty to you if you choose not to take it.  Contingencies for a specific reason, completing a home inspection within 7-10 days, contingent on financing with a pre-approval in hand, etc., make sense, where you need a reasonable condition  met to complete the sale and you obligate yourself to the contract if that condition is met.  For an open "study period," my response would be, go do your homework first, and if it's still for sale when you're done, then make me an offer. 

I might listen to the option route, where you pay me x dollars for the right to purchase my property at a certain price within 30 days, and you forfeit the option fee if you don't exercise the option, but that would likely only be if it had been on the market for quite a while with no offers.      

Sorry, didn't see @James Wise  's post until after I replied.  What he said...

Originally posted by @Manish A. :

Hello

My agent suggested I make an offer on a single family home with a "30 day study period" clause.  She said this would give me time to go to the county and do my homework, and if things didn't work out with the county I could bail on the offer.

Wanted to get thoughts from anyone who's used "study period" in their offers before.  I haven't heard of such a clause.

Miz

 Keep in mind advice given may or may not apply to you, because different locations have different markets going on. All the advice given that no seller would accept the offer are based on sellers markets, but in a buyers market who knows what a seller might accept. Also the individual property can influence how the seller would react, even in a strong sellers market there can be individual properties that have issues with them that make them very difficult to sell so the seller might consider any offer presented.

For instance we recently sold a nice townhome in a nice community, within a week we had 3 cash offers, two of which were 6-7% over asking, further they waived appraisals. With that property in this market in Denver I'd have never accepted an offer with a 30day contingency in it, that offer simply wouldn't have even been something to consider.

Take another example of a non-conforming property 20 miles away on the plains east of Denver, the property is messed up, total wreck, far from populations that would want to rent there, the farmer has had the property on the market for 2 years.  A property like that with it's unique situation, the seller might accept a offer with a 30 day contingency.

I'd ask the realtor why she believes the seller wouldn't reject that offer and post back what she says.

One simple metric would be how long has the property been on the market? A seller with a property on the market for 600 days is going to be a much different seller than one who just put it on the market last week.

@Manish A.  I guess, there is more to the study idea. A 30 day due diligence period is common. But for that to accept you have to offer due diligence money sent to the seller together with the contract proposal. In some states, not sure about MD, contingencies are outdated. You can withdraw from the offer inside the dd period for whatever reason. The dd money stays with the seller whose house was off the market for that time. Of course, if it is an attractively priced house, you are competing with other, often better offers and the seller might ignore your offer and go into contract with someone else. As pointed out, this depends on how attractive the property is. 

If the study time is really the whole story, then, yes, by all means, get an agent with some experience.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here