Eliminate the Confusion Around Offer and P&S Money

Money and stress seem to go together, but not knowing when you need funds causes the most stress of all! Sometimes, buyers end up scrambling to find their offer or P&S money because they didn't know when it was due. 

Let's start with definitions. 

What is Offer Money?

The offer money check for $1,000 accompanies the initial offer to purchase the home. Offer money is due the day your offer is accepted. It is cashed and held in escrow (so nobody can access it) until the sale is completed. 

What is P&S Money?

The Purchase and Sale (P&S) agreement is the document drafted by the seller's attorney and is typically signed a few weeks after the offer is accepted. It outlines the terms of purchase and the sale price. So, your P&S money is due after your offer is accepted, and you sign the P&S agreement (the date of P&S signing is on the offer). This check is for a larger amount based on the home's value. If the sale falls through, the seller potentially keeps these funds. 

Here are true stories…

Story # 1 - Selling One House to Buy Another

A client was selling one house and buying another in Braintree, MA. They would be walking away with the proceeds of their house to cover the cost of the new one. They didn't realize when they signed the P&S that they owed the P&S money on that day, and the check would be cashed immediately.  In this case, the P&S money was $33,000.

They thought they could pay the P&S money when their house closed, using the proceeds of the sale.

It was a mess! They borrowed the money from their 401K and some from their parents. The parents signed a gift letter for the lender stating the money would not have to be paid back, even though they would receive the money back when the house was sold. Now, the parents ended up nervous and because the rest of the money came from a 401 (k), it delayed signing the P&S until that money was released.

Story # 2 - A Dream House

Another buyer hesitated to place an offer on a dream house in Marshfield, MA, because they didn't completely understand the timeline of when the money was due.  They had plenty of money, but it was in different places.

In this case:

• The $1,000 offer money was due upon acceptance of the offer.

• P&S money ($18,000 in this situation) was due about 2 weeks later. 

• The balance is due the day of closing, usually around 6 weeks from the day you sign an offer. In this case, they chose to close in 2 months to give them time to get their finances in order.

Story # 3 - From the Seller's Point of View

I represented the seller. The buyer didn't realize they needed their P&S money so soon. They asked to extend the P&S signing date so they could “move money around”, which always sounds a bit sketchy. So, the sellers were nervous until the last minute, wondering if it would close, which it did.

Takeaways

• Have your offer money ready when you make an offer. 

• Be ready with your P&S funds about 2 weeks later. 

• Don't expect to use the proceeds of a pending sale for P&S funds.

We have heard many other stories from colleagues about how their clients have scrambled to get their P&S money.  One agent said they had a client sell a Persian rug to get their P&S money.