Negotiating the Purchase
You’ve found it—your “dream house”! You want to buy it. Now what? You make an offer by submitting a signed real estate offer to purchase with the type of financing you desire.
This will be the sales contract once the seller accepts. When you and the seller sign, you are agreeing to the contract conditions. Before you sign it, read it carefully and make sure you understand every detail. Ask questions. Verbal agreements should be written into the contract. If you plan to have a lawyer represent or advise you, retain one as early as possible. This is where your Long & Foster Sales Associate and an attorney can give you the assistance you need.
Offers and Counter Offers
Your Long & Foster Sales Associate will take the offer to a “contract presentation” with the home seller and the listing broker. In some areas, the three of them will discuss the offer, and the seller will accept it as written, or make “counter offers” on unacceptable aspects, or reject it. The selling broker will then bring back the offer to buy to the homebuyer, who can accept it, counter-the-counter offer, or reject it. The offer to buy becomes a contract when all parties have initialed every counter and signed the offer.
When you sign the offer to buy, you also will have to submit a deposit to show that you are earnest about your desire to buy—appropriately called “earnest money”.
Making Sure Your Contract is Complete
Sales contracts differ, depending on circumstances, but there are several provisions you may want to include in a contract for the purchase of real estate.
- Deposit. The amount of “earnest money” should be clearly stated, plus the amount of money you will be paying at settlement and your sources of financing. A common purchase deposit in many areas is 1-2% of the purchase price, deposited in escrow.
- Contingency on Financing. Be specific about the total loan amount, the date a second or third mortgage is due, and the exact financing terms. Many contracts have an “alternative financing clause” that allows buyers to accept different financing than that which is written in the contract, as long as it doesn’t affect seller’s net proceeds.
- Contingency on Inspection. You may make the contract contingent on a building inspection report. You will usually have to pay for this inspection, but the peace of mind or detection of a problem is well worth the cost of inspecting.
- Termites. The contract may require the seller or buyer, depending upon the area, to pay for a termite inspection. The results of this inspection may further require payment for removal of the infestation and repair of any damages from the infestation. You should get a written report at settlement indicating that the property is free and clear of any active termite infestation. In some areas, well and septic certificates are also required.
- Personal Property. Light fixtures, drapery rods, chandeliers, washers, dryers, refrigerators, heating oil in the tank, storm windows and doors, firewood, even swimming pool chemicals, and other items not physically attached should be specified in writing if they’re to be conveyed to the buyer. Misunderstandings based on verbal agreements can delay settlement as well as cause friction.
- Repair Work. Standard contracts of sale require sellers to be responsible for plumbing, heating, mechanical, and electrical systems to be in working order at time of settlement. You should conduct a “pre-settlement walk-through inspection” which should be made several days before or not later than the day of settlement.
- Title Attorney or Insurance Company. The buyer has the right to select a title attorney or insurance company. You should shop and compare prices before deciding what attorney or title company will conduct your settlement. Also, be sure to clear the title company with the lender, whose interests are also involved. Ask your Long & Foster Sales Associate for a list of our Prestige Partners®, who provide settlement and insurance services throughout our seven state Mid-Atlantic Region and the District of Columbia.
Closing and Occupancy Date. Include an arrangement with the seller in the event you can’t secure possession on the agreed date, such as a daily rent-back agreement for “post-settlement occupancy”.