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Pay attention to the terms, not just the price

Giving and Getting: Why the Terms of a Home’s Sale Are Often More Important Than the Price Paid

 

One of the most important points that home buyers and sellers focus on when buying real estate is the negotiated sales price in the purchase and sale contract. While the sales price is undeniably important, the fact is that other terms in the sales contract may have more far-reaching and significant effects on the transaction.

With a closer look at some of the most important terms, you will see why you and your agent should actively negotiate for improved terms rather than a lower sales price.

 

Closing Costs

Some buyers and sellers will haggle over a few thousand dollars in the sales price without paying attention to the closing costs, but the fact is that the closing costs for a typical transaction may cost the buyer between two to five percent of the sales price on average. A sales contract may be negotiated so that the seller assumes some or most of the closing costs, and this can result in considerable savings the buyer. Likewise, when a contract is negotiated in the interest of the seller, the seller may save thousands of dollars at closing if the contract states that the buyer is responsible for these costs.

 

The Property Inspection

Many home buyers opt to obtain a property inspection to determine if there are hidden issues with the property structure, foundation, roof, air quality and other components. Some inspections reveal that a home is in fairly good condition, but others may reveal that a property needs thousands or even tens of thousands of dollars worth of repairs. Some sales contracts may be written so that the buyer may back out of a contract within a certain period of time after receiving the property inspection report or so that the terms of the sales contract may be re-negotiated once the property inspection report has been completed.  One of the best things that a seller can do is to get an insepction ahead of time and fix the issues that can be fixed.  This way there are no surprises and you may even save the inspection period when a buyer is more likely to back out of a contract.

 

The Appraised Value

In an ideal world, a home would appraise for the contracted sales price, but this is not always the case. A sales contract may be written with terms that allow for the sales price to be renegotiated after the appraised value is confirmed, and this may benefit both parties. Some sales contracts, however, state that the negotiated sales price is final regardless of the appraised value. If the buyer is seeking a loan most banks will not allow the sale to go through and most buyers will not pay more than a house is worth.

Special Contingencies

A real estate transaction may extend for several weeks or even months while the buyer contracts with a lender, an appraiser, a property inspector and other third parties. During this period of time, many events can occur that may adjust the interest level or even the ability of the buyer and seller to fulfill the contract. Some sales contracts are written so that the buyer may opt out of the contract within a certain period of time with minimal expense and regardless of other factors related to the appraisal and inspection.

Generally, there are standard terms found in many real estate sales contracts, but these terms can be adjusted by either party to benefit buyers or sellers. If you are buying or selling a home be sure to take into account the terms of the contract.

 

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