Nolo's Essential Guide to Buying Your First Home (49 page)

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Authors: Ilona Bray,Alayna Schroeder,Marcia Stewart

Tags: #Law, #Business & Economics, #House buying, #Property, #Real Estate

BOOK: Nolo's Essential Guide to Buying Your First Home
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The Seller Accepts Your Offer
 
If the seller accepts your offer in writing, you have a contract. You and the seller can begin to perform all the tasks that take you up to the closing, as described in Chapter 11.
The Seller Rejects Your Offer
 
Sometimes, the seller will flatly reject your offer, usually because someone else made a better offer, and yours simply didn’t rise to the top of the stack. The seller’s agent should contact your agent with the bad news.
You Might Make the B-Team
 
Instead of rejecting your offer outright, a seller may suggest that you make a backup offer to purchase the house if the chosen deal falls through. Your backup gives the seller a little extra security and saves the hassle of readvertising.
If you submit a backup offer, ask the seller to give you a final yes or no within a few days or to specify that the exact terms of the agreement are to follow. This protects you in case you find another property, lose interest, or want to renegotiate terms with the seller.
 
The Seller Counteroffers
 
The seller may decide that your offer is okay but needs improvement (usually a higher price). The seller may then give you a counteroffer, with an expiration date for your reply. A counteroffer is a good sign—it means the seller is interested in negotiating with you. But Massachusetts broker Nancy Atwood warns, “Sometimes the buyer and seller forget that they have the same goal in mind, which is the purchase of the home. I was once involved in a transaction where the buyer and seller were fighting over a couple thousand dollars, on an $800,000 property! Eventually they did relent and split the difference, but it caused some unnecessary stress on both sides of the table.”
The counteroffer may be structured like a whole stand alone-contract, or it may incorporate your original offer, essentially saying, “I agree to the terms of the offer, except with these changes.” If the new terms are satisfactory—for example, you’re willing to pay a higher price or give the seller extra time to move out—you can accept the seller’s counteroffer.
When a seller receives multiple offers, the seller may return multiple counteroffers, asking people to submit new, better offers. It’s kind of like being outbid on eBay: You can then decide whether you want to put in a new offer, but your competitors will be doing the same thing.
If the seller gives you a counteroffer that you don’t like, you can reject it and simply walk away, or you can counter the counteroffer.
You and the Seller Negotiate
 
You and the seller can continue to exchange counteroffers until you reach agreement or give up. Each time, you’ll include expiration dates for your counteroffers. If an expiration date passes, negotiations are over—no deal. If, however, one of you accepts the other’s counteroffer, you’ll put that agreement down on paper, as described next.
Mel:
Which reminds me, where’s your report card?
Cher:
It’s not ready yet.
Mel:
What do you mean, ʺIt’s not ready yet?ʺ
Cher:
Well, some teachers are trying to low-ball me, Daddy. And I know how you say, ʺNever accept a first offer,ʺ so I figure these grades are just a jumping-off point to start negotiations.
From the movie
Clueless
, 1995
 
More Than Words: What’s in the Standard Purchase Contract
 
When you and the seller agree and write a contract, it will probably look like pages and pages of a legal document—which it is! Luckily, you’ll probably be spared creating it from scratch. Your state’s Realtor® association may provide a standard preprinted form for your use, called something like “Contract to Purchase” or “Offfer to Purchase.” These fill-in-the-blanks forms contain state-specific legal language so you won’t forget to deal with important issues. But they usually leave space for you to customize, too. If you’re using an attorney, he or she may start with some boilerplate and customize it to your purchase.
To form a legal contract, your final agreement must be in writing and signed by both you and the seller. So if the seller or the seller’s agent calls you and says, “We accept your offer,” wait for that signed agreement before taking further action.
Whether you use a standard form or a fully customized document, certain key terms and phrases are likely to be in it (though these, too, vary by state). Read it carefully, using the summary of common terms below for both decoding and making sure it contains the protections you want. We’ll discuss many of these terms further in this and later chapters.
 
TIP
 
Ask questions.
If you don’t understand the meaning of a term or document, don’t hesitate to ask your real estate agent or attorney for a plain-English explanation.
 
•
Parties.
The names of the buyer and seller.
•
Property description.
The property address and a simple physical description (“a single family house”).
•
Offer or purchase amount.
The price you’ll pay, as long as the seller agrees and all the other terms are met.
•
Earnest money amount.
How much you’ll deposit when the transaction begins but forfeit to the seller if you back out of the transaction for a reason not allowed in the contract.
•
Down payment amount.
How much you’ll pay in cash toward the purchase price (unless your agreement simply includes a contingency that you qualify to finance a certain percentage of the purchase price).
•
Contingencies.
Conditions that must be met for the sale to be finalized.
•
Loan amount and conditions.
How much you’ll borrow, and on what terms and with what restrictions, to finance the purchase.
•
Title.
The seller promises to be in a legal position to sell you the property, without any outstanding debts.
•
Seller representations.
You may require the seller to make certain promises about the property, for example, that to the seller’s knowledge, the roof is free of defects or, in a condo or co-op, that the seller knows of no mold or pest problems in the building.
•
Fixtures and personal property.
Fixtures (items permanently attached to the property, like built-in appliances or fences) stay with the house unless you or the seller specify otherwise, while personal property leaves, unless you and the seller agree otherwise.
•
Rights of use.
If you’re buying a condo, co-op, or townhouse, you may have the right to use portions of the property that you either don’t own yourself or that you own jointly with others, such as a specific parking space.
•
Possession.
The date you can possess (move into) the property.
 
 
TIP
 
Your lender may require you to occupy the home within 30 days after closing.
That’s to make sure you’re using the property as a home, not an investment. (Mortgage interest rates on investment properties are normally higher and have special qualification requirements.)
 
•
Prorations and assessments.
How you and the seller will split recent and upcoming fees like mortgage interest, property taxes, and community association fees.
•
Closing agent (or “escrow holder”).
Who will act as intermediary, assisting with preclosing tasks and holding onto any money that you or the seller deposit in advance. This may be a title company, escrow company, or attorney(s).
•
Fees.
A list of the various fees to be paid before and during the closing—including escrow fees, title search fees, deed preparation fees, notary fees, and transfer taxes—and who will pay them.
•
Expiration date.
The time limit for the seller to accept your offer.
•
Closing date.
The date the transaction finalizes and the house is legally yours. In some states, instead of an actual date, the contract will give a certain time window or say “on or before” or “on or after” a certain date.
•
Agent payment or commissions.
What payment will be made to the real estate agents representing you and the seller.
•
Damage to property.
How damage to the property during escrow (such as a fire) will affect the agreement.
•
Resolving disputes.
How you and the seller will resolve any legal disputes, and whether you’ll use alternative methods before going to court (such as mediation or arbitration).
•
Entire agreement.
A statement that you and the seller don’t have any other agreement and that if you want to alter the one you have, you’ll do it in writing and both sign it.
•
Time is of the essence.
This confirms that if a date was important enough for you to write into the agreement—for example, the closing date—it’s a fundamental part of it, and if either you or the seller don’t make the date (or modify the agreement), then you’ll have breached the contract.
•
Signatures.
No matter who goes first, you don’t have a contract until both of you have signed.
 
 
CAUTION
 
Put co-op agreements in writing.
When buying stock in a co-op, your state’s laws may not require a written agreement. But to prevent any “he said, she said” disputes, get it in writing, anyway.

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