GET IT IN WRITING!
That is it. The rest are details. Of course, as we all know, the devil is in the details. And those devils can come back to make life miserable for sellers unless they are prevented from coming back in the first place.
In most jurisdictions oral agreements are not part of the contract when it comes to real estate. Now is the time to eliminate the possibility of future hard feelings between the parties.
You want to sell your house and the prospective buyer wants to buy it. The purpose of the contact is to ensure that each of you gets what she expects to get. In other words, this is the place to spell out with as much precision as possible the terms of the offer and in turn, the acceptance. A poorly worded offer or contract may simply be buying a lawsuit instead of a house. This is the worst result. You already know how emotionally charged selling your house is. Well, buying is also fertile ground for hard feelings.
Real estate professionals know that a good deal involves more than just the price. Take a look at a typical real estate sales contract for your area. You will notice that the place for filling in the price is only one line, while the terms can take paragraphs.
It is a good idea to have a real estate contract filled out with your information. Contracts for the purchase of real estate are governed by local laws and courses of dealing. The laws regarding real estate vary from state to state and from locality to locality, especially when it comes to what the courts consider local customs and usage. You can download basic real estate contracts and disclosure forms from the Internet, or get copies from your attorney, your local office supply store, or title company escrow officer.
Contracts are not always the dry, evenly balanced documents they may appear to be. Everything has a reason for being included or excluded. An experienced local real estate attorney, title company officer or escrow agent can help familiarize you with the basic elements and responsibilities under the contract. She will be able to tell you just where the balance lies and exactly what potential exposure you may have.
The Basic Contract Equation: Offer + Acceptance + Communication = Contract
The Opening Offer
An opening offer is the initial amount your prospective buyer is willing to pay for your house. It should be in written contract form. The offer should include the following: Price; proposed closing date; inspection and/or mortgage contingency; other contingencies; and the earnest money provision. Of course, the offer should be dated and signed by the prospective purchaser.
Remember: Until you accept an offer, it is not a contract and the buyer can change or withdraw it.
What does a good offer look like?
A good offer, one that will lead to the successful sale of your house has realistic loan terms; a satisfactory closing date; allows room for negotiation; and allows for renegotiation based upon latent defects which may be discovered during an inspection.
Earnest Money
When you accept an offer to sell your house, you also want the buyer to give you earnest money. Earnest money used to be called a "binder" because it bound the buyer to the deal and made it much more likely the deal would go through. Even though we've changed the name, the reasons for getting some money along with an offer remain the same: to ensure that the buyer is serious and that the deal will go through.
How much is enough? As the seller, you want as much as possible. After you accept an offer, you are going to stop actively marketing your house. If, after the contingencies are met, Mr. or Ms. Buyer gets cold feet and wants to walk away from the deal, you may be entitled to some or all of it. The amount of earnest money that accompanies an offer depends on what is customary in your area. It may be a flat amount or a percentage of the purchase price and should be a part of your sales contract. (5% is common in many parts of the country.)
Who holds the earnest money?
Again this depends on what is customary in your area. If your buyer is represented by an agent, that agent's brokerage can hold it or the escrow agent or the attorney.
At the closing or settlement, the earnest money is applied to the purchase price.
Once you agree to the terms and sign the offer, you have a ratified contract. This is the first step, not the final step, to having your house sold. There are still hurdles to be surmounted, in the form of contingencies, before you actually cross the finish line at the closing.
Communication
After the offer has been accepted, the final step is to communicate that acceptance to the buyer together with a copy of the accepted offer. If it is mailed, the postmark is the date of notification unless it is otherwise specified.
Note: Many states consider a faxed contract to be legal notification. Check with your lawyer or escrow agent to see if yours does.
© 2007 Complete Books Publishing, Inc.
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