You have probably submitted a few offers in your real estate career. You know that not every offer breezes through the acceptance process. And once accepted, not every offer magically results in closed contract.
You know how to turn a good offer into a great contract – and what adjustments and considerations might occur along the way – but it’s very likely that many of your clients don’t! First time buyers may have never heard of contingencies before or know what to expect in terms of counter offers.
Before you sit down to write your first offer (and maybe even before you take your clients out to look at properties), here are 7 things related to real estate contract negotiation you should discuss with your buyers. Remember: share your expertise now to get the referral later.
Unless your buyers are fine with buying a home “as-is,” their contract will probably include contingencies, but many first time buyers have never heard this term before. A contingency is a provision in a contract that requires the completion of a certain act or event before the contract becomes binding. Common contingencies to talk about include home inspection and financing contingencies.
If the offer to purchase a property is contingent on a home inspection, the inspection will usually turn up a few things that need to be fixed. The buyer may then make a request for repairs or ask for a cash credit in some cases. If repairs are requested, the seller must complete them before close of contract. Reasonable repair requests include material faults that may affect the sale of the house going forward, like a failing roof or faulty wiring.
What exactly is the buyer getting with the house? Typically, all fixtures are included. This means anything attached to the home, like countertops and mantles. This does not necessarily include appliances, so be sure to clarify early what is and isn’t a part of the sale. Window coverings and light fixtures should also be inquired about.
Sometimes sellers will be willing to part with their personal property to close a sale. If your buyers see something they love during an open house – perhaps a chandelier or piece of furniture – there’s no harm in asking the seller to include it in the contract, just be sure they put it in writing.
4. Closing Costs
Closing costs refer to taxes, fees and other costs associated with closing a real estate transaction. Who pays the closing costs in your area, the buyer or the seller? In many cases, closing costs are shared by both parties. Can they be negotiated as part of the contract? Discuss closing cost estimates with your buyers so they know what to expect.
It is not uncommon for agents to submit an offer that requires a response by a certain deadline. Depending on the current real estate market and the customs in your region, you will know what the best course of action is in this regard and should advise your buyers accordingly. If you’re not sure about whether or not including a deadline with your offers is a good idea, here are some contract deadline strategies recently shared by RISMedia.
6. Counter Offers
Many times, sellers will reject the initial offer and respond by making a counter offer. This shows that the seller is amenable to working with your buyers, but may want slightly different terms before accepting your offer.
Counter offers may indicate a price that is higher than the original offer, but lower than original asking price. Depending on the situation, the buyer(s) may want to accept the counter offer or make a counter counter offer. As the buyer’s agent, you may suggest what you think the best course of action is given the current market conditions, but remind your buyers that it is ultimately their decision.
7. Home Warranties
Home warranties insure buyers against specific physical defects, such as faulty plumbing or electrical wiring, for a specific period of time. It is a one-time purchase, and the premium may be paid by the buyer, seller or even the broker. If this is a service you offer your clients, let them know in advance. This will increase their peace of mind when it comes time to sign the papers on one of the biggest purchases of their lives.
You can also suggest that they ask the seller to pay for the home warranty. Many sellers are happy to do this.
First time buyers will appreciate this overview and repeat buyers might be ready for a refresh, especially if they’re buying in a new state. The more preparation and communication you put into play before making the offer, the more comfortable your buyers will be. You may even want to share this information on your website as part of your buyers resources.
What else do you discuss with your buyers before making an offer? Is there something critical in your market that we left out?