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Key Elements
of the Contract
Price
and terms
If you receive
what you consider an insultingly low offer, don't give in
to an emotional response. Be realistic, objective and, above
all, cool. Examine the offer. Was the price based on an independent
appraisal or a broker's market analysis? How long has your
property been on the market? How many written offers have
you received? What kind of market are you in -- buyer's or
seller's?
Don't
use price alone as a reason not to counter or negotiate. A
first offer may reveal what's most important -- price or terms
-- to this particular buyer and thus give you the key you
need to begin the bargaining.
Condition
of home and inspection
It is fair
that the purchaser should have the opportunity to have your
home inspected for soundness of construction and state of
repair. Keep the process fair by insisting that the person
or firm to be used is named in the contract by professional
designation, and set a time limit for the removal of the contingency
-- five or so working days.
As
a rule, contract language determines what must be in working
order at settlement. Make sure everything is clearly spelled
out; otherwise, local law and custom may prevail.
Financing
If the contract
is contingent on a buyer's ability to obtain an acceptable loan,
does the clause spell out what actions are required by the buyer?
What interest rate and number of discount points does the buyer
consider "acceptable"? Is there a time limit? What
will happen if no loan is secured by the agreed-on deadline?
How will you know when the buyer gets a loan commitment? How
can the contingency be removed? Generally, you'll want to leave
the buyer as few escape hatches as possible.
Response
deadline
You'll be
asked to respond to a contract offer within a specified period
of time -- say, one or two days. Try to get as long a response
time as possible. If you are presented with a desirable contract
containing a deadline you are unable to meet -- perhaps because
your attorney or spouse is out of town -- counter promptly
with a more suitable time frame -- and an explanation.
If you
think you'll have other offers coming in, you'll want to buy
as much time as possible to review them and perhaps use one
offer to jack up another.
Sale
of buyer's home
Should you
cooperate with a prospective purchaser who must sell a home
before buying yours? Maybe. But when you accept a contract
offer contingent on the sale of the buyer's house, you are
linking the sale of a property you know -- yours -- to the
sale of one you don't know -- his. You'll be taking your house
off the market until the buyer's house is sold and closed.
If things go awry, you could end up weeks later just where
you started -- hanging up a "for sale" sign.
Nevertheless,
if you believe accepting an offer contingent on the sale of
the buyer's home is the best you can hope for under the circumstances,
seek the advice of a broker familiar with the market in the
area of your potential buyer's home. Assure yourself that
the property is salable and reasonably priced. Get marketing
plans set out in the contract. For example, it should be clear
what the owner proposes to do if the home doesn't sell after
one month, after two, and so on.
Consider
asking for an up-front nonrefundable option (in lieu of an
earnest-money deposit), which you will retain if the deal
fails to close within a specified time. Have the contingency
sale clause reviewed by your attorney. Better still, have
her write it.
Settlement
date and occupancy
If you're
selling your home because you already have another house under
contract, seek a settlement date that will enable you to take
your sales proceeds to the next closing. Be realistic; the
buyer of your home will probably need at least 30 to 50 days
to arrange financing and come to closing.
Most sold
homes are delivered to the buyer empty and clean on settlement
day. If you need a temporary place to live after settlement,
resist the path of least resistance. Our best advice: If at
all possible, avoid staying in your old home even one night
after closing. And don't accept the new owner's offer -- no
matter how friendly -- to accommodate you with a short-term
lease.
Other
conditions
Other contingencies
address problems or events that may happen between the time
the contract is signed and the time title is passed to the
buyer. If your house burns down or a natural disaster strikes,
what happens? Does the buyer have to buy and pay the agreed-on
price? Can the whole deal be called off? Can a lower price
be offered? What about insurance proceeds?
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