More Summer Real Estate
I wrote previously about getting the right professional help when you pull up stakes and head for your next residential destination. From a lawyer's perspective, though, the opportunity to help often doesn't come early enough in the process. People hook up with their brokers to sell or see the object of their (dis)affection, and then they're so anxious to seal the deal that they sign whatever's put in front of them. And I'm not dissing the brokers; many have lots of experience and can do justice to a purchase and sale agreement; they just may not be representing the party who needs the help the most. See that last entry for more on that.
So, for those of you who can't wait to ink something and then want to ask their questions later, here are a few tips to consider before giving it your best John Hancock:
No matter how hard you shake the other party's hand, there's no such thing as a binding verbal agreement to sell or buy real estate - so your instinct to get it on paper is a commendable one. The law recognizes many verbal contracts, but not where real estate is the subject. That goes back to something like the Magna Carta. The trouble is, once you've signed it, you are committed - unless you specifically write in that you've got, say, 48 hours to have a lawyer review it for you.
There's no legal requirement for any specific deposit amount - $100 would do the trick if the other party accepted it. Still, the custom these days in these parts is for about 5% of the purchase price. If you're a buyer, I always suggest a modest amount when the agreement is signed, and then the rest once you've done your due diligence with the lawyer or completed your inspections. From the seller's standpoint, you want enough up front to make sure the buyer isn't just kicking the tires.
Ah, inspections! Whether you plan to inspect everything or not, give yourself the right to do so. You can always waive an inspection later on, but you won't get the right to do more if you didn't reserve that opportunity in the agreement. And give yourself enough time. Fourteen days is the absolute minimum if you're going to use a professional person - and I suggest that rather than your brother-in-law. Plus, if there's a well or septic system, or a basement that might have a radon problem, you'll need time to get back the test results. Of course, from a seller's standpoint, don't allow so much time that your sale is up in the air for 30 days or more during the prime marketing season.
Likewise, a cash sale is always preferred, but if your buyer needs financing, keep the leash as short as possible there, too. In fact, inquire whether they're pre-qualified for the amount in question, so the loan commitment can be quick, and the only real issue will be getting the place appraised for what your buyer has agreed to pay.
As for what's included in the deal beside the kitchen sink, make sure any appliances you're counting on as a buyer are going to be in good working order - but as a seller that you're turning them over in "AS IS" condition without any guaranties like that. See how important it is who's writing the agreement!
If the place is a hoarder's paradise, or if you want to make sure some important painting or repairs have been completed (that were included in the agreement, of course), make sure you have the right to a final inspection early on the day of the closing. Landscaping with major appliances is an honored Southern tradition, but you may not want to take on that refrigerator planter.
Finally for now, the dates in these agreements can be misleading. The date for getting inspections done and raising problem issues, and the date for pulling out if your financing falls through, are cast in concrete. If you miss them, you're out of luck, and you either lose your deposit or you go forward without those bases covered. Ironically, though, the specified closing date in New Hampshire is just a sort of target date, and if it takes someone a few days more to pull their act together, that's not going to blow up the deal. That is, unless the date is really important to one of you, and so you spell out clearly in the agreement that "time is of the essence" of that date. That could indeed be the case if the sellers need the funds to close on their new McMansion, or if the buyers need to get in pronto because their moving truck is idling in the driveway.
Posted 07/18/2013
So, for those of you who can't wait to ink something and then want to ask their questions later, here are a few tips to consider before giving it your best John Hancock:
No matter how hard you shake the other party's hand, there's no such thing as a binding verbal agreement to sell or buy real estate - so your instinct to get it on paper is a commendable one. The law recognizes many verbal contracts, but not where real estate is the subject. That goes back to something like the Magna Carta. The trouble is, once you've signed it, you are committed - unless you specifically write in that you've got, say, 48 hours to have a lawyer review it for you.
There's no legal requirement for any specific deposit amount - $100 would do the trick if the other party accepted it. Still, the custom these days in these parts is for about 5% of the purchase price. If you're a buyer, I always suggest a modest amount when the agreement is signed, and then the rest once you've done your due diligence with the lawyer or completed your inspections. From the seller's standpoint, you want enough up front to make sure the buyer isn't just kicking the tires.
Ah, inspections! Whether you plan to inspect everything or not, give yourself the right to do so. You can always waive an inspection later on, but you won't get the right to do more if you didn't reserve that opportunity in the agreement. And give yourself enough time. Fourteen days is the absolute minimum if you're going to use a professional person - and I suggest that rather than your brother-in-law. Plus, if there's a well or septic system, or a basement that might have a radon problem, you'll need time to get back the test results. Of course, from a seller's standpoint, don't allow so much time that your sale is up in the air for 30 days or more during the prime marketing season.
Likewise, a cash sale is always preferred, but if your buyer needs financing, keep the leash as short as possible there, too. In fact, inquire whether they're pre-qualified for the amount in question, so the loan commitment can be quick, and the only real issue will be getting the place appraised for what your buyer has agreed to pay.
As for what's included in the deal beside the kitchen sink, make sure any appliances you're counting on as a buyer are going to be in good working order - but as a seller that you're turning them over in "AS IS" condition without any guaranties like that. See how important it is who's writing the agreement!
If the place is a hoarder's paradise, or if you want to make sure some important painting or repairs have been completed (that were included in the agreement, of course), make sure you have the right to a final inspection early on the day of the closing. Landscaping with major appliances is an honored Southern tradition, but you may not want to take on that refrigerator planter.
Finally for now, the dates in these agreements can be misleading. The date for getting inspections done and raising problem issues, and the date for pulling out if your financing falls through, are cast in concrete. If you miss them, you're out of luck, and you either lose your deposit or you go forward without those bases covered. Ironically, though, the specified closing date in New Hampshire is just a sort of target date, and if it takes someone a few days more to pull their act together, that's not going to blow up the deal. That is, unless the date is really important to one of you, and so you spell out clearly in the agreement that "time is of the essence" of that date. That could indeed be the case if the sellers need the funds to close on their new McMansion, or if the buyers need to get in pronto because their moving truck is idling in the driveway.
Posted 07/18/2013