Part 3 Getting to Closing
Based on what you know about the value of your home you should already be prepared with three different values before you get started.
- Best Case price
- Mostly likely price
- Reserve price, or drop dead, no way I’m going below this number.
If you get an offer be prepared to not like it. That is just how this works. Keep in mind, even a horrible offer is better than no offer at all. It means someone is stepping up with a real interest in your home. You will be a target of lowballers for the simple reason they know you aren’t paying a commission. I would advise you to take all offers in stride and not take offense by even the worst of them.
The first offer will often tell you where they expect to end up, and that is about half way in between their offer and your asking price. If it is really low, I suggest you tell the buyer you will give it some thought and get back to them. After some time has gone by, make some kind of a counteroffer to show you have some flexibility, to keep them interested. I have had contract negotiations go on for weeks. You need to be patient.
Some sellers might be inclined to discount a bit more if the buyer can close quickly with cash. Others might allow complicated contingencies like, the successful sale of the buyers present home in order to close, if the buyer pays full price.
There is a trade off for everything. You may not like the price at first, but if you ask enough questions you may find areas you can agree on and eventually make a deal. Perhaps you are in a position to offer some owner financing. If so, you can usually leverage this for a better price.
Contracts and Forms
In order for an offer to be enforceable it must be in writing. If you get an offer from someone who isn’t working with an agent you will likely get a verbal offer. Which may be fine but eventually if you do come to agreement you need to get it writing. This is where your attorney or an agent can also come in handy. Most agents in Florida will use what is called a FAR/BAR As-Is Contract For Purchase and Sale. They just fill in the needed information and terms and have both parties sign it.
Here is the tricky part for inexperienced home sellers. How do we get the contract right? You can purchase common contracts at places like Office Depot, but I would not recommend that. I have made available to you the 5 most common forms and contracts used by Florida Realtors.
These forms are not self explanatory though. If you do use this forms seek advice from a real estate professional or attorney.
There is more to a purchase agreement than just price. You need to consider the terms that go along with it. Terms are such things as:
- The amount of the Earnest Money Deposit
- Down payment, if financing the property
- Closing date
- Inspection period
- Special contingencies like, financing, appraisal, sale of present home.
After the Contract is Signed
The effective date of your contract is the date the last party either signs it or initials any changes. That is the date from which several actions are measured. Such as:
- 3 Day rescission period for condos in Florida
- Inspection period
- Additional deposits if mandated.
You should request an escrow letter from the escrow agent or buyers agent. This proves the Earnest Money Deposit has been received from the buyer.
Often the deposit will come in two parts. A nominal amount with the offer and the remainder to come after a period of time, usually after the inspection period. Be sure to follow up and make sure you get escrow letters for both of them.
If the buyers are financing be sure to get updates from them regarding the status of the loan. Try to get the contact information of the loan officer if you can. Stay in touch with the closing agent as much as possible. They should be able to provide you with status reports of the title work at least weekly. If you have a mortgage on the property they will need your lenders contact information so it can be paid of at closing.
Avoiding Potential Deal Killers
As far as I am concerned, what happens after the contract is signed can be the most stressful. There are many things that can, and do, go wrong no matter how well you plan ahead. You can’t possibly prepare for every circumstance. Here are the most common.
Typically a purchase agreement will allow the buyer one to two weeks to have an inspection done to make sure there are no serious repairs needed. A professional home inspector will always find something wrong with your home. Even the best maintained home will have at least $2000 worth of small items that can be fixed. With an “as is” contract this shouldn’t be enough to kill a deal. If there is more than 1.5% worth of unexpected repairs don’t surprised if the buyer attempts to renegotiate the deal. It is also possible that the inspector finds a really big problem that would cost too much for the seller to fix.
This is why I earlier recommended the seller have the home inspected prior to putting it on the market. It can prevent you from wasting a lot of time and emotional anguish. Another good reason to have your home inspected is it becomes a very good marketing tool, and you have your own ammunition should you have the buyer try to renegotiate the price after the inspection.
If the buyer is getting financing for the purchase, an appraisal will be required by the lender. If the appraiser finds the value is below the contract price then the buyer won’t get the financing and can be released from the contract. First the buyer will likely come you seeking a price reduction to the appraised value. You can either decline, and let the buyer come up with a larger down payment, or perhaps split the difference. If neither of these options work try appealing the appraisal. You may be able to get the bank to have it re-appraised with different comparable properties.
It is possible your home was flagged for a code enforcement problem and you weren’t aware of it. The fines can accumulate daily. The municipalities I have had to deal with will usually drop all or most of them if you appeal it and fix what ever the violation was. You can prevent surprises by calling you city and making sure you are clear of any violation.
-Title Issues and Liens
This can cover a lot of things, too many for the scope of this guide. Death and divorce are often the source of these problem. If you suspect you may have a problem, it is best to get ahead of it and have an attorney or title agency run a title and lien search prior to putting your home on the market.
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