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Review the key elements of the contract
Before accepting a buyer's purchase agreement, be sure you review these key areas.
Price and terms
Unless you are in a hot market, and especially if you are selling the home yourself, don't be alarmed or upset if you get an unreasonabl offer. Examine the offer and ask yourself a couple of questions. Is your price based on an independent appraisal or a broker's market analysis? How long has your property been on the market? How many written offers have you received? What kind of market are you in -- buyer's or seller's?
Don't use price alone as a reason not to counter or negotiate. A first offer may reveal what's most important -- price or terms -- to this particular buyer and thus give you the key you need to begin the bargaining.
Condition of home and inspection
Routinely, an offer will be made contingent on the results of an independent home inspection. The buyer wants to make sure that the house is soundly constructed, and that there are no major problems. Keep the process fair by insisting that the person or firm to be used be named in the contract by professional designation, and that there be a time limit for the removal of the contingency, typically no more than 10 working days.
As a rule, contract language determines what must be in working order at settlement. Make sure everything is clearly spelled out, or you may find yourself with problems later.
Financing
Most contracts are contingent on a buyer obtaining an acceptable loan. The contract should clearly identify what actions are required by the buyer, e.g., what interest rate and number of discount points does the buyer consider "acceptable"? Is there a time limit? What will happen if a loan is not secured by the agreed-upon date? How will you know when the buyer gets a loan commitment? How can the contingency be removed? Generally, you'll want to leave the buyer as few escape clauses as possible.
Response deadline
When an offer is made, you will be expected to respond within a specified period of time, usually one or two days. Try to get as long a response time as possible. If you are presented with a desirable contract containing a deadline you are unable to meet -- perhaps because your attorney or spouse is out of town -- counter promptly with a more suitable time frame -- and an explanation.
If you think you'll have other offers coming in, you'll want to buy as much time as possible to review them and perhaps use one offer to negotiate a better price from another potential buyer.
Sale of buyer's home
It is very common to get an offer that is contingent on the prospective buyer selling their home before buying yours. When you accept a contract with this contingency, be aware that you are linking the sale of a property you know -- yours -- to the sale of one you don't know -- theirs. You'll be taking your house off the market until the buyer's house is sold and closed. If things go wrong, you could end up weeks later just where you started -- hanging up a "for sale" sign.
Nevertheless, if you believe accepting an offer contingent on the sale of the buyer's home is the best you can hope for under the circumstances, seek the advice of a broker familiar with the market in the area of your potential buyer's home. Assure yourself that the property is salable and reasonably priced. Also have it clearly spelled out what the buyer proposes to do if their home doesn't sell after one month, after two, and so on.
Consider asking for an up-front nonrefundable option (in lieu of an earnest-money deposit), which you will retain if the deal fails to close within a specified time. Have the contingency sale clause reviewed by your attorney.
Settlement date and occupancy
If you're selling your home because you already have another house under contract, seek a settlement date that will enable you to take your sales proceeds to the next closing. Be realistic; the buyer of your home will probably need at least 30 to 60 days to arrange financing and come to closing.
Most sold homes are delivered to the buyer empty and clean on settlement day. If you need a temporary place to live after settlement, because you have not closed on your new home,it may be possible to stay in your home and pay daily rent to the new owner. If it's absolutely necessary, do it, but we don't recommend this option.
Other conditions
Other contingencies address problems or events that may happen between the time the contract is signed and the time title is passed to the buyer. If your house burns down or a natural disaster strikes, what happens? Does the buyer have to buy and pay the agreed-on price? Can the whole deal be called off? Can a lower price be offered? What about insurance proceeds?
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