Are You Ready?
OK, now that you’ve done all of the prep work to make your house sparkle and shine, and have placed your online ads in all the very best spots. The brochure box is stuffed with your full color flyers, and you are starting to get showings. You’re ready to “Sell My House”. Someone has looked at the house and decided that they want to buy it. You are now about to receive your first offer on your home! Are you ready?
Negotiations
There will probably be some negotiating on certain elements of the offer. It is beyond the scope of this article to attempt to teach you how to negotiate effectively. However, I think its important to just mention that you never want to appear vulnerable or desperate. For example, never offer up that you don’t have another offer pending, or that you have to sell within 60 days. Statement along this line will give the buyer the upper hand in the negotiations.
If the buyer or the buyer’s agent If the buyers are working with a real estate agent then the agent will prepare and present the offer to you on behalf of his/her client. If the buyer is not working with an agent they will be presenting the offer to you directly. The offer should be in writing, and never verbal. Hopefully you took my advice and familiarized yourself with the real estate purchase contract ahead of time so you know what to be looking for.
Accept, Reject, or Counter
You basically have three options as a response to the offer: you can accept the offer as written, you can reject the offer outright, or you can make a counter offer. Remember to never take a low offer personally; in fact you should anticipate it, and that way you can deal with it a littel easier. And unless an offer is downright insulting, you shouldn’t reject it either. Unless the buyers have made a full price offer, or at least one that you’re satisfied with, you should go back to them with a counter offer. Make sure your counter offer is in writing. You don’t want the deal on your for sale by owner transaction to fall through at this point.
Items that need to be reviewed in the contract:
You and the buyer need to agree on the sales price. If the buyer is using a real estate agent, and you have agreed to pay an agent commission, be sure that you factor in the commission that you’ll have to pay out when you are considering an offer price. If there is no agent involved then of course there will be no commissions to be paid.
Earnest Money Deposit
The contract should require a deposit of earnest money in an amount equal to 1%-2% of the agreed upon sales price. The earnest money check should be made payable to a third party trustee, like an attorney or the title company that you have engaged for the transaction. The earnest money deposited by the buyer is forfeit if they terminate the transaction without cause, and the contract should clearly spell this out. If the transaction is completed the earnest money is credited to and applied to the buyer’s closing costs.
Loan Terms
The buyer’s loan terms should be clearly spelled out in the contract, including the amount of the buyer’s down payment and/or loan amount. The contract should clearly indicate that the buyer needs to come up with the funds required for down payment prior to closing, and failing to do so would result in defaulting on the contract and loss of earnest money. A low down payment may indicate a weak/risky buyer, but not always. As a seller you have the right to request a letter or other documentation from the buyer’s lender attesting to their ability to qualify for financing, and you can make your acceptance of their offer contingent upon receiving satisfactory proof.
What Stays and What Goes
The contract should specify what items of personal property are included in the sale. Appliances like stoves, ovens, and dishwashers usually stay because they are built in. But often times refrigerators and washers and dryers are included. These items should be clearly listed in the contract. If there are items that you want to make sure are specifically excluded from the sale be sure to list these as well. This will avoid any possible squabbles at the closing table.
Inspections, Appraisals, and Surveys
The contract should allow the buyer to inspect the property, either personally or by hiring a professional inspector. The contract should specifiy a deadline for the inspection to be completed. If the inspection results in problems the buyer may choose to terminate the contract (and get their earnest money refunded) or they may request that you make repairs prior to closing. It’s your choice. If you agree to make the repairs the contract remains in force, if you choose not to make repairs then the buyer can terminate the contract or he can withdraw the request for repairs and choose to continue with the transaction.
The buyer’s lender is responsible for ordering the appraisal. In the contraxct there should also be a deadline for the completion of the appraisal. The contract should allow the buyer to terminate the contract (and get their earnest money refunded) if the appraised value comes back less than the agreed upon purchase price. This happens occasionally, and if it does you should be prepared to renegotiate on the agreed upon price.
The contracxt should include a deadline for a survey to be completed. The title company will indicate whether or not a survey is required, and if so can provide the buyer with the names of some surveying companies. If the survey is required and indicates illegal encroachments that could closud title (for example) the buyer may terminate the contract (and get their earnest money refunded).
Closing Date
You and the buyer should agree on a closing date and it should be specified in the contract. If the buyer is unable to close the deal on the closing date then he is in default on the contract and his earnest money may be forfeit.
As soon as both you and the buyer have signed the contract your house is “under contract” and you can no longer accept any other offers. Once the buyers have provided you with their earnest money be sure and deliver it to your title company immediately so they may place it in escrow. The money still belongs to the buyer until the sale is completed or they officially back out of the deal.
This contract review summary is not intended to be all encompassing, and you should always have a lawyer review or prepare the real estate contract. Don’t ever attempt to draft a contract by yourself when you sell your own home; there are too many details that need to be dealt with, and a poorly written contract can cost you a lot of money, or embroil you in a lawsuit.
