Monday, March 12, 2007

Home Buying Process (5) ... Really! Sales Agreement


7. FINALLY! OK. I hired a Realtor, been pre-approved by a lender, and found a home I’d like to buy. We’re about there, right?

HAHAHAHAHAHAHAHAHAHA!!

8. Be serious!

Sorry.

There’s a good case to be made that from here on out is where the agent earns his or her commission. Now that you’ve found a home you’d like to purchase, the next step is to apply your interests to a clear, comprehensive – and ultimately acceptable – purchase and sale agreement. The standard Oregon form is seven pages, small print, and note it’s a binding contract. I assume you’ve read it through to at least get a basic understanding of what you’ll be signing?

9. Ummmmmmm…

If your agent doesn’t give you a sample copy when you first meet, ask for one! Read it through, again to get the basics. If you have any serious questions, consult an attorney; that’s something your agent usually is not.

Very basically, the main negotiating points in a sales agreement are these:

Price. You can offer whatever price you want and the offer must by law be presented to the seller. That said, though we’re in a buyer’s market, there is no fire sale. The object is to come to an agreed price – remember, the actual value of a property is the amount a seller is willing to accept and a buyer willing to pay – so offering twenty percent below list is likely to be rejected outright. (The seller has three options: accept, counter, or reject.) Though it’s ultimately your decision, listen to your Realtor! He or she will have done a market analysis and will know how to get to the price you’re comfortable paying.

Earnest Money. This is the amount deposited into escrow at the time the contract is agreed upon, later to be included as part of the down payment. It shows two things to a seller: your financial stability, and how serious you are regarding the purchase of the property. Since this is the sole remedy to the seller for a buyer having breached the terms of the contract, it’s highly unlikely, say, $1000 will be accepted on a $400,000 home. Given there are several buyer-protection clauses in the contract that protect it, usually the higher the amount the more seriously the offer will be considered.

Financial considerations. Again, you must have a pre-approval letter from a qualified mortgage broker. Beyond that, finances are what they are: 20% or more down is a sign of stability, 100% loans less so, especially with lenders tightening qualifications. That doesn’t mean they aren’t accepted – they are, all the time – but will receive more scrutiny, which may mean offering better terms in other areas. [Note you are not obligated to stick entirely to the terms written in the contract.]

Contingencies. If you have to sell your current home to qualify for buying the one on which you’re making an offer, it’s much more likely to be considered than it was a year ago, but if it’s accepted it’s usually put in a ‘bumpable’ status. That means the home stays on the market; if another suitable offer is received you’ll have a set amount of time to remove the contingency or terminate the offer (you get your earnest money back). Usually best to get at least an offer on your existing home first, or there are many loan products on the market that can help you carry both. The only caution: with the days on the market over a month longer than a year ago, there exists the possibility you’ll end up with two mortgages.

Closing and possession dates. You can make your offer much more attractive – often to the point of canceling objections to a low price – if you can accommodate the needs of the seller; your agent will have found those out before the offer is written. Sellers whose homes have been on the market for several months and are already vacant love quick closing dates; some sellers need time to pack and move, or are waiting for a home they’re building to complete.On the other hand if you have needs that have to be met, that can lead to accommodations elsewhere.

Ask your agent!

10. What about inspections? Disclosures? Right of revocation?

Next installment…

11. Oh, good. Can we have that in less than, say, a month?

Promise.

12. What's with the picture?

The door to your dream home.

13. ...

OK. I just like the colors.

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