| Once you have a buyer who wants to buy your home, it's a
little late to start learning about contracts. Learn some things
that will help when the time comes.
Here are some of the contract related issues you need to consider:
Earnest Money: The amount of earnest money need is
different in each sale. Many people think that it's always better to
have more in case the sale falls though, but in reality, they are many
reasons that a buyer would get the earnest money returned if the sale
falls through (for example, inspection problems you refuse to correct,
inability of the buyer to get a loan, etc.). If you demand too high
of earnest money deposit, you may loose a buyer who has very little cash
but is well qualified for a no money down loan!
Sales Price: What you will accept for a sale price is a
very person decision. Make sure that you have considered all the
expenses you will have at closing before your set your price. If the
buyer offers lower than you were anticipating, don't let your emotions
blow the sale. Remember, everyone wants to negotiate so they can get
the best "deal" possible. Keep negotiating!
Financing: We'll discuss financing in more detail in a later
article, but we still need to discuss it, too. You need to make sure
that all the terms of the buyer's financing are in the contract. For
example, if the buyer asked you early in the process if you would pay
closing costs for them and then doesn't write it in the contract, you need
to be careful. They may not have realized it had to be in
writing. If you accept the contract without it...and later they
don't have enough money to pay their closing costs you'll have a
problem. Either they won't be able to close of the sale...or they
will demand that you pay their closing costs since they talked to you
about it and they thought you were going to pay the closing costs for them
You also need to have a reasonable loan approval date in the
contract.
Personal Property: You and the buyer need to come to an
understanding about what personal property stays in the house and what
personal property is going with you. This needs to be on the
contract to prevent misunderstandings.
Closing Date: The closing date needs to provide enough
time for the loan processing and title work to be done.
Possession Date: The possession date is normally the day of
closing or the day after closing. If you decide to let the buyer
move in early or they let you stay late, liability, insurance and
financial issues relating to the possession need to be put in writing.
Taxes: Most taxes are pro-rated at closing. This means
that you will pay the buyer at closing for every day of the current year
that you owned they house. The buyer will then pay the taxes at the
end of the year.
Inspections: Any inspections the buyer wants to have done on the
home need to be addressed in the contract, as well as the deadline for any
requests to be made. The contract should also address what happens
if the buyer decides there is too much work to be done on them home....or
if you refuse to do all the work required.
Contingencies: There are many different contingencies in a
normal real estate sales contract. Inspections, title work,
financing....they are all contingencies. But the contingency that
concerns people is the contingency on the buyers current home selling
and/or closing. Be very careful with that form of contingency.
Title Issues: Before a sale can be completed, the title
needs to be clear! The closing company (or title company, abstract
company, etc) will do that for you, but what happens with title problem
needs to be in the sales contact.
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