Counteroffer nulls the original offer

The law states that a prospective home buyer's offer immediately becomes void when a seller makes a formal counteroffer, but it's a good idea for the buyer to still follow up with a certified letter stating that the counteroffer has been rejected.

Q. We made an offer to purchase a home. The seller rejected it, and then presented us with a written counteroffer for $7,000 more. We don't think the house is worth that much. Are we required to notify the seller in writing that we are no longer interested in purchasing his property, or would a simple phone call be sufficient?

A. Real estate laws in all 50 states say that your original offer automatically became null and void when the seller presented you with a written counteroffer. You now have the option of making a new offer, which would become legally binding if the seller accepts it, or simply end the negotiations without penalty and start looking for a different house.

You aren't legally obligated to notify the seller in writing or by phone if you have decided to reject his counteroffer and hunt for another home. But it's a good idea to put your rejection in writing anyway and send it to him via certified mail. Doing so will provide an extra layer of protection for you if the seller later files a groundless breach-of-contract suit, and will also help you to recover any attorney fees and court costs.

Q. What is a "blanket mortgage"?

A. It's a mortgage that covers two or more properties. Blanket mortgages are becoming more popular, especially among rental investors and second-home buyers, as lenders across the U.S. continue to tighten their loan-underwriting standards.

Let's say you want to purchase a small rental property or vacation home in an area where prices are soft. Financing the deal would have been easy a few years ago, but a lender might very well reject your loan application today amid worries about the sluggish economy and rising foreclosures.

To entice the lender to make the loan, you could instead ask for a blanket mortgage that would involve refinancing the home that you already own and the cash needed for the additional property that you want to buy. The mortgage would reduce the bank's chance of losing money on the deal because its risks would be spread across two properties instead of one, and borrowers are far less likely to default on a loan for a rental or vacation home if the same loan also would allow the bank to foreclose on their primary residence to cover potential losses.

Of course, what's good for the bank isn't always good for the borrower. If agreeing to a blanket loan is the only way you can obtain financing to purchase the new rental or vacation property, you must first be certain that you will be able to handle the payments: You could lose both the newly acquired property and your primary home to foreclosure if you eventually default.

Q. We have been interviewing several real estate agents because we are planning to sell our home. We are surprised that none of the agents or their companies belong to the local Better Business Bureau. Why not? How can we check out an agent's background, or at least find out if they are licensed?

A. Many brokerage firms and independent sales agents don't belong to their local BBB, in part because most states keep detailed records about their past that are freely available to the general public.

At a minimum, your state's realty commission or real estate department can tell you whether an agent is currently licensed and when the license was obtained. Most state regulators also can disclose whether an agent or brokerage has been subject to disciplinary action in the past.

You can verify an agent's license status by visiting the Internet site operated by the Association of Real Estate License Law Officials (www.arello.org), a trade group that represents realty regulators across the nation.

ARELLO's Web site does not provide as much detailed information about an individual agent as your state real estate department can, but it's the fastest way to determine whether he or she has an up-to-date license. The site also has some useful consumer-related articles and several links to other helpful sites on the Web.

© 2008, Cowles Syndicate Inc.