So You Want to Make an Offer… Here’s What You Need to Know
You’ve pored over the listings, watched all of Chris’s videos, gone out on showings, and now you’ve fallen in love: You’re ready to make an offer on your dream Virgin Islands property. But how do you do that? Luckily, Team Hanley is extremely well versed in the process.
What’s more, making an offer to purchase Virgin Islands real estate is not all that different from stateside. Here’s what you need to know — and what you’ll need to provide — in order for us to write up your offer to buy a St. Croix property.
Purchase Price
It goes without saying that you need to include your offer amount in the offer. You also have to indicate whether you’ll be paying cash or obtaining a mortgage. If you’re financing the purchase, you must provide a preapproval letter from a local VI lender.
Earnest Money Deposit
The deposit is your show of good faith that you intend to go through with the purchase, and it is credited toward the full amount that you will owe at closing. The amount of earnest deposit is negotiable, with the key being that it should be strong enough to show a seller that you are serious while still within your financial comfort level. Once you and the seller come to terms and sign the contracts, you will be required to wire the earnest funds, typically within 48 hours. However, this money doesn’t go “hard” until the end of the inspection period, which brings us to…
Inspection Period
The inspection period begins the moment the signed contracts are delivered back to both seller and buyer. This is typically 14 days for a residential property. In that period, you will be hiring a general home inspector as well as any specialty inspectors based on the attributes of the property, with pool and solar being the most common. These inspections may reveal issues that will either need to be remedied by the seller or potentially credited as a future expense on the closing statement for you to remedy later. However, if a seller has listed a property “as-is,” the inspection may only be “for discovery purposes only.” In the event issues are discovered and we are unable to come to a resolution with the seller, you may exercise your right to terminate the contract.
Closing Period
This is the length of time that you expect the transaction to be completed. For cash purchases, 30 days is possible, though we often recommend 45 days to prevent the extra step of having to sign an extension if there’s a delay. For mortgages, you’ll want at least a 45-day close.The closing period is inclusive of your inspection period, meaning that the clock on the close begins as soon as the offer-to-purchase contracts are signed by and delivered to all parties.
Virgin Islands Stamp Tax
This one is unique to the VI. Any real estate transaction in the VI is subject to a transfer tax to be paid to the government, based on the purchase price: 2% for up to $350,000; 2.5% from $350,001 to $1,000,000; 3% from $1,000,001 to $5,000,000; 3.5% over $5,000,000. Historically, the stamp tax has been paid by sellers as a part of their closing costs, though nowadays, everything is a negotiation. The seller may indicate on the listing how they would like the tax paid, and it’s not uncommon for the buyer to agree to pay half or even all of it as a part of the overall negotiation to procure the property.
Buyer Broker Compensation
Like the VI stamp tax, the sales commission to the real estate agents involved in a transaction has traditionally been covered by the seller. But as of August 2024, all Realtors are required to sign a Buyer Broker Agreement with buyers prior to showing any properties, and the buyer broker compensation is a negotiation point as well, so therefore the offer must indicate who will pay it.
Furnishings
Though less common stateside, many if not most residential homes and condos in the Virgin Islands are sold at least partially furnished. If that is the case, a furnishings rider will be included in the offer to request an inventory during the inspection period. Generally we recommend you take whatever the seller is leaving behind, but if you have strong feelings, you may also note whether you want only certain items, or that you want certain items (or everything) removed before close.
Other Contingencies
If you have other property to sell before you can make this purchase, you will need to indicate that as a contingency — ideally, waiting until the first property is under contract and through inspections, so it’s a reasonable bet that the transaction will go through. If you’ll be purchasing with a 1031 exchange, that must be indicated in the offer. If there is a tenant in place in the property you want to buy, you’ll need to include your preference of whether it should be free and clear at closing, or the date by which the tenant must vacate.
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