Prior to receiving an offer for your property, it is good idea to become familiar with a sales contract. This will give the seller a head start on understanding what they might receive in an offer. Initially, the seller is most interested in the sales price, but the seller needs to give serious consideration to the other terms within the offer. It is possible the seller may receive a full price offer, but net $15,000 or more under the asking price. Following is a suggested way to break down an offer on your property:
· Purchase price - The sales price is the beginning point within the offer. Seller needs to understand what he nets will be adjusted by the other terms within the offer.
· Earnest money – This amount tends to indicate how serious the buyer is about purchasing your property. The earnest money is usually deposit with a third party, such as a title company or lawyer, etc. This money is normally credited to the sale of the property at closing. The buyer may choose to cover his closing cost and/or down payment with this amount. If the deal falls apart, there are sections within the contract that define whether the earnest money can be returned to the buyer. This needs to be read and fully understood by the both the buyer and seller.
· Mortgage contingency – This probably is the main contingency within the contract that will allow the buyer to escape from the contract without losing their earnest money. The seller needs confirm the interest rate, amount of loan, and number of days to perform is within realistic limits. In addition, the listing agent should review these figures, and verify these figures with the buyer’s lender. If this is not done, there is a possibility the buyer could tie up the seller’s property for an extended period of time. Remember, this not a guaranteed approach, but increases your probability of having a successful closing.
· Seller concessions – This usually is the buyer requesting the seller to pay a percentage of closing cost, or requesting the seller to contribute some personal property at little or no cost. This is more likely to happen during buyer's market.
· Inspections – As seller, you need to be award that the buyer will request an inspection of the property. The inspection may include the following: general inspection of the house, septic tank, sprinkler system, and termites, etc. At this time, the seller needs to have a good understanding of the condition of his property, and have an approximate idea what the buyer will be requesting for repairs.
· Personal property – This property is defined as items that are not attached to the property, but included in the sale. This may include such items as, refrigerator, and most furniture. In other situations, the buyer may request all personal property to be removed. This normally happens when there is a lot of junk on the property.
· Appraisal – Most of the time, banks will not appraise the property at the sales price. Sellers need to be careful on the amount of seller concessions they give to the buyer. Seller concessions tend to drive the sales price higher, and make it less likely for the appraised value to be equal or above the sales price. If the appraised value is less than the sales price then buyer and/or seller must make some concessions before closing on the home.
· Buyer selling property contingency – This occurs when the buyer must sell his property prior to closing on the new home. The seller needs to have a time limit clause in the contract. This time limit is known as kick-out clause, and usually is defined for either 48 or 72 hours. If this clause does not exist within the contract, the buyer could potential tie up the seller’s property indefinitely. The advantage of this contingency clause, allows the seller to keep the property on the market.
Based on above information, the seller quickly realizes that the sales price is only the starting point. From the sales price the seller deducts the other factors in order to realize the net proceeds he will receive from the sale of his property.
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