The natural focal point of a real estate purchase contract is the selling price of the home, but the price is not the only factor that determines the net bottom line for both the buyer and seller. Here are five other points to consider:
1. What are the estimated transaction costs and who will pay for what? typical costs include the brokers’ commission, home inspection, termite inspection, escrow fees, title insurance, transfer taxes and recording fees. Who pays for what is a matter of both local custom and negotiation.
2. How much money is the buyer putting into escrow and how soon? An earnest money deposit and a substantial down-payment are generally seen as a sign that the buyer is serious about completing the transaction. From the seller’s point of view, the more money the buyer places in escrow and the sooner the money is transferred, the better.
3. Is there a mortgage financing contingency and how specific is it? The mortgage contingency clause is a must for buyers, unless they are paying all cash for the home. Without this contingency, buyers can be legally obligated to purchase the home even if they cannot obtain financing.
4. What furniture, fixtures and appliances, if any, are being sold with the property? Technically, anything that is permanently affixed to or installed in the home is real property. This distinction is a narrow one and it naturally leads to a fair amount of confusion. The California Association of Realtors Purchase Agreement has a paragraph with a list that helps clarify any confusion. However, if the seller can’t live without the rose bush planted for a family member or the chandelier in the dining room, it’s must to make that exclusion known to all potential buyers.
5. What will happen if either side breaches the contract? Unless an unmet contingency triggers the abandonment of the contract, it is a binding legal documents. Buyer or sellers who fail to perform need to talk with their attorney about how to proceed.
This is just a bit about negotiating when buying or selling a home…. let me know if you have any questions about the local real estate customs in San Diego.
