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The Bottom Line on Contract Negotiations
The price isn't the only factor that determines the net
bottom line.
By Marcie Geffner
The natural focal point of a real estate purchase contract
is the selling price of the home, but the price isn't the
only factor that determines the net bottom line for both the
buyer and the seller. Is a bargain for the buyer really a
bargain if he or she is paying all the transaction costs?
Is a top price for the seller really a top price if the buyer
wants all the furniture to be included in the purchase price?
Or if the buyer can't come up with the downpayment or qualify
for a mortgage? Before you decide to go ahead with a great
price, here are five other bottom-line points to consider:
1. What are the estimated transaction costs and who
will pay for what? Typical costs include the brokers'
commission, a home inspection, a termite inspection, escrow
or attorney's fees, a title search, an owner's title insurance
policy, transfer taxes and recording fees. The price tags
on these items vary greatly around the country. Who pays for
what is a matter of both local custom and negotiation. 
2. How much money is the buyer putting into escrow
and how soon? A big deposit -- called "earnest money"
-- and a substantial downpayment are generally seen as a sign
that the buyer is serious about completing the transaction.
From the seller's point of view, the more money the buyer
places in escrow and the sooner the money is transferred,
the better.
3. Is there a mortgage financing contingency and
how specific is it? The mortgage escape clause is
a must for buyers, unless they're paying all cash for the
home. Without this contingency, buyers can be legally obligated
to purchase the home even if they can't obtain financing.
Further, an open-ended statement that says the buyer will
obtain a loan "at the prevailing rate of interest" leaves
the buyer completely exposed to interest rate fluctuations.
A statement that says the loan must be at an interest rate
"not to exceed xx percent" and on specified terms is preferable.
4. What furniture, fixtures and appliances, if any,
are being sold with the property? Technically, anything
that's permanently affixed to or installed in the home is
real property. Everything else is the seller's personal property.
This distinction is a narrow one and it naturally leads to
a fair amount of confusion. Are built-in appliances real property
or personal property? What about a shelving system? A chandelier?
Window coverings? Potted plants in the backyard? Sellers who
intend to remove anything that's attached to the home should
have that spelled out in the contract. And the same goes for
buyers who expect to acquire any of the furniture or other
movables.
5. What will happen if either side breaches the contract?
Unless an unmet contingency triggers the abandonment
of the contract, it's a binding legal document. Buyers who
fail to perform can lose their deposit money. Sellers who
try to back out can be sued for "specific performance," which
forces the sale of the home to the buyer. Many contracts also
specify that disputes must be brought in small-claims court
or presented for arbitration or mediation. |
