Negotiations over the sale of your home in Oakland County Michigan or anywhere else begin when a buyer presents you with a written purchase offer, usually through his or her real estate agent. You can accept the offer, in writing, reject it or write a counter-offer, usually by modifying the original offer presented. Several series of counter-offers may occur before you finally reach an agreement.
The process of contract building ends when both you and the buyer sign the contract. At this point, your home is considered to be “Sold,” or “Pending” and even in some cases “CCS” (especially in this market) though the terms of the contract will not be fulfilled until settlement.
Whether you ever reach an agreement, however, will depend on how well you and your agent negotiate the terms of the contract with the buyer. If you took the time to prioritize your goals, as suggested in an earlier lesson of this course, you can refer back to them at this stage to help you stay focused on what you really want in your sales contract.
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Work For The Win-Win Solution
The whole point of negotiating is to find that point at which both parties to the contract get enough of what they want. Yet,
sometimes the stickiest issues in negotiations over a home sale are very small ones. Sales have been lost, or nearly lost, over minor details, when both the buyer and seller insist on getting their way and neither will compromise.
It’s important to be flexible, while keeping your attention fixed on your primary goals and the final outcome. Ask yourself: Is a specific item or group of items the buyer wants you to convey worth keeping, even if it causes you to lose the sale? How much would it really cost you to delay, or move up, the occupancy date? What inconveniences and costs will you incur if you pass on an offer and wait for another buyer to meet every one of your terms?
Be aware, too, that market conditions will play an important role in your negotiations. If you’re fortunate enough to be selling in a sellers’ market, you won’t need to be quite as flexible, or generous, as you might be if there aren’t enough buyers to go around.
Sales Price
Although the offer price is certainly important, it is only one part of the contract. Other contract terms will increase or decrease the amount of money you actually net from the sale of your home. For example, a buyer may offer your full listing price, or more, but ask that you pay some or all settlement costs, which could amount to several thousand dollars. Keep your calculator handy when negotiating. You’ll want to assign value to everything you receive and give away in the contract.
In a strong market, you may be fortunate enough to have multiple offers for your home, some, perhaps, with escalation clauses that push the purchase price well above your asking (or listing) price. You’ll take the highest offer, right? Not necessarily.
What if the appraisal comes in under that high offer price? Will the buyers have enough cash to make up the difference? If the contract doesn’t force the buyer to follow through in this situation, or the buyer simply can’t fulfill the contract, you could end up back at square one, with or without a deposit check in your pocket. Whatever offer you accept should have a high likelihood of going to settlement. That means focusing on the terms of the contract and the financial wherewithal of the buyer.
Deposit
Buyers’ offers are almost always accompanied by a deposit check or earnest money, representing the seriousness of the buyers’ intentions. You’ll want to consider how large that deposit is before you accept a contract and pull your home off the market. The larger the deposit, the more the buyer will lose if he or she fails to fulfill the terms of the agreement.
Settlement Costs
Different traditons exist in different areas of the country as to who typically pays certain types of settlement costs — loan points, attorneys’ fees, title searches, recording fees, etc. Nevertheless, you and the buyer can split these costs any way you want as you negotiate your contract.
In some cases, the buyer and seller may agree to pay particular types of costs. Or one of you may agree to pay a set amount, say $2,000, toward the total cost of settlement. Be sure to factor the costs you decide to pay, if any, into your bottom line.
Conveyances
When selling your home, make sure you know what belongs to the house (what “conveys” to the buyer) and what you can take with you.
Generally, if something is connected to the wall, floor or ceiling, it’s considered a “fixture” and stays, unless specifically stated otherwise in the contract.
If you really want to take fixtures with you, say antique hardware or a chandelier, think about replacing it before you put your home on the market. That way, it can never become a contract issue.
Items that are not connected to the home, such as appliances, outbuildings or playsets, may also convey with it. These items should, however, be specifically listed in the contract. Again, assign a value to these items so you know how keeping them or conveying them will affect your bottom line.
Contingencies
You’ll discover all sorts of contingencies in real estate sales contracts. Buyers almost always include a financing contingency, making the sale dependent on the buyer’s ability to secure a particular type of financing, at or below a specified rate, by a certain date. Ideally, the buyer has already been pre-approved, or at least pre-qualified, for a mortgage loan. Assuming they are, and the rate specified isn’t out of the ballpark, this contingency is not likely to scuttle the deal.
Another common contract inclusion buyers seek is an inspection contingency. With a “general inspection contingency,” buyers have the option to walk away from the contract if they don’t like anything found in the professional inspector’s report. If you decide to accept an inspection contingency, make sure it’s a “specific inspection contingency,” which clearly states what problems would allow the buyer to walk away and how other problems found in the home will be resolved (e.g., timely repairs at the seller’s expense, reduction in sales price, etc.).
Buyers may ask for a home-sale contingency, making their purchase of your home dependent on the sale of their old home within a specified period of time. If you’re in a strong sellers’ market, you may want to pass on this type of contingency, since it would increase the possibility that settlement will not occur. Or you might accept the contingency with the provision that if another buyer makes a non-contingent offer, you’ll have the option of dropping the first contract.
A number of other types of contingencies and terms are possible. Rely on your professional agent’s advice to help protect your interests as you move through the complexities of contract negotiation
Want to find out more? Read our online report,CONTRACT: Who’s Offering What, When And How For Your Home? You can read it right now by clicking on the link.
Tom Gilliam
RE/MAX Classic
248-790-5594
tgilliam@twmi.rr.com
www.HomeSaleXpert.com
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