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Home Purchase Contingencies III
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We have, in the last few days, discussed three terms or contingencies which generally accompany the cash offer on a house (inspection contingencies, mortgage contingencies, and, where applicable, condominium contingencies.) The last two stand out with the distinction of being the ones most likely to sink an offer. Contractual contingencies and miscellaneous contingencies, however, can also present opportunities to make a lackluster price offer shine.
Contractual terms are the conditions that determine date, time, and other more or less mechanical parts of the offer. These are up to the buyer to suggest and for the seller to reject.
Some sellers will lay it all out, specifying a possession date for the property that coincides with the end of the school year or the time when a new job in a distant state begins. As a buyer you will mess with these dates at your peril. Sellers don't want to spend a month in a hotel trying to finish up employment obligations or attend a kid's high school graduation. If you have a clue about the seller's timetable, try your very, very best to accommodate that in your offer.
But, lacking any information about the seller's personal situation, a buyer with no house to sell, no lease or family constraints can raise the curb appeal of his offer by deferring to the seller. The words "at the seller's discretion" on issues dealing with the passing of papers, possession of the property (not necessarily the same thing), or other time sensitive issues can go miles toward endearing the buyer to the seller.
Even if the buyer has deadlines (something that should also be checked out with the loan officer as mortgages can have finite dates for performance) "at the seller's discretion" can be followed with "not to exceed (the date necessary.)" This still gives the seller some leeway which he is bound to appreciate.
While sellers may want to hang around in their own living rooms for a while, they are usually more than anxious to nail down the sales contract. As we talked about in the earlier pieces, no seller wants to pull his house off of the market for weeks, lose valuable marketing time, then find out that his buyer cannot or will not perform.
For that reason, the tighter one can make the timelines in an offer, the better chance it will be accepted.
A buyer has, as we discussed earlier, a period of time to conduct inspections. A smart buyer will not wait until he is writing an offer to line up inspections. While he is getting a mortgage pre-approval he should be talking to home and pest inspectors about their availability. Good home inspectors are usually busy, but perhaps a retainer (to be applied against the inspection fee) would encourage one to juggle his schedule so as to be available when an offer is accepted.
Most lenders have a few favorite appraisers anxious to keep his business. The officer should be able to estimate how quickly his appraisers can get out to the property once a contract is signed.
If all of this homework is complete, a buyer should be able to move benchmarks for inspections and mortgage commitment forward, making the offer much more attractive to a nervous seller.
Another contractual area where the buyer can buy some cheap points is the earnest money deposit.
The amount of money required to bind an offer (or a "Purchase and Sale Agreement" in "two step" states) varies dramatically by local custom. These local customs are, honestly, all over the place. I am personally familiar with transactions in four states in the last four years and have been surprised at how little cash it requires for a buyer to encumber property in three of them. In Virginia, Utah, and Georgia, the deposit was pretty much a flat $1,000 to $2,000, on properties that ranged from $140,000 to $300,000.
This is a real opportunity for a buyer.
If you are sure that your mortgage, inspection, and any other contingencies are sufficient to protect you in any areas of concern, put forth a larger earnest money deposit than the seller may expect. If the agent asks for $2,000, write a check for $5,000 (assuming of course there is money in the bank to cover it.) This will give the seller a comfort level with both you and your offer. Many people can, and do, walk away from a $1,000 deposit for frivolous reasons. Few will be so cavalier about $5,000. You have now become a very serious buyer.
Offer or Purchase and Sale forms usually specify how these escrow monies are to be handled. The default is in an interest-bearing account with the interest to be split between buyer and seller. Be a hero. Specify that the interest is to flow to the seller. In all honesty it will probably be less than $25.00, but it can buy some good will that might carry the transaction over some rough spots.
Miscellaneous contingencies
Here is the place where buyers can blow the deal. Not only can, they do, and over the darnedest things.
There are miscellaneous contingencies that simply will not fly. And chief among them is "this offer is contingent upon the sale of the buyer's current home."
Come on! If a buyer won't bet that his house will sell in time for him to purchase another home, why should the seller? It is incumbent upon the buyer to get that particular duck in a row (Okay, one duck, no row, but you know what I mean) before he enters the buyers' marketplace. See "Chicken or the Egg", September 27, 2004 on this website for a full discussion of this problem.
Here is another deal killer. Insisting that property, specifically excluded from the sale on the listing sheet which has been sitting out of the dining room table for all to see, be included in the purchase. This seems to be an ego problem much of the time. The chandelier in the dining room wouldn't survive a first pass by the crew of Extreme Home Makeovers but the seller loves it. It was his grandmothers, or he bought it at auction on the day he proposed to his wife. Who knows? But he wants it. So, perversely, do many buyers.
If you are one of those buyers, get over it!
You want the house. The seller wants the chandelier or the swing set in the backyard that is all that is keeping his kids from leaving home over having to move. Which is more important?
Thank you!
Next topic.
You are buying a house. You are not buying appliances or furniture.
If you want appliances, check out the Yellow Pages, "A" would be a good place to start. Don't start writing demands for personal property into your offer. A refrigerator, washing machine, dryer, or dehumidifier is a pretty small item over which to lose your dream home. Remember, we are talking about clean offers and nothing is less clean than insisting on the inclusion of personal property. These transactions are best handled totally outside of the house sale, and without involving the real estate agents. A clean offer will keep things friendly between buyer and seller and will allow the parties to talk cordially about such small details before the closing.
A little secret. The seller, once the dust clears, will often approach the seller with an offer to sell, maybe even leave, items of furniture or appliances. Moving such items often costs more than the property is worth. If such a gift comes your way of course, you are under no obligation to accept it and then the seller has no excuse for leaving it behind.
So, make a good offer, make a clean offer, and enjoy your new home.
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Comments (2)
| We are in a home sale contingency in which we are trying to buy a new condo, and trying to sell our used condo. the new condo has been completed for almost a year now, and we have been unable to sell our condo. The new condo builder doesn't seem to be in a hurry to turn us loose. How long are we legally obligated to stay in this contract? Until the contractor is ready to sell to someone else? If neither of us can sell our property, how long are we obligated, a year, 5 years, a lifetime? |
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| Above Posted By:
bill
| Fri, 23 Feb 2007 14:09:24 EST |
| What would some standard mortgage contingencies read?
Have a unique situation,- already been living in co-op unit for years. It was supposed to be in my name and we are changing the stock certificate from my mother to myself. I have a refinance loan waiting / ready once the stock is changed, and I am paying for so many sets of lawyers for the other folks I have not been able to afford my own. My board secretary asked that we include any mortgage contingencies in our memo to change the stock. |
|
| Above Posted By:
cath
| Sat, 12 Aug 2006 11:52:15 EST |
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