When you make the decision to purchase a new home, of course, you want the transaction to be smooth and efficient. Real estate negotiations are all part of the game, and it’s not uncommon for buyers and sellers to go back and forth over a variety of items until a mutually-agreeable purchase contract can be reached. Here are some commons surprises to be advised about in real estate negotiations.
Contingencies: Almost all purchase contracts will include contingencies. The most common ones are with respect to inspections and investigations, loan approval, appraisal of the property, and the sale of another property. As a buyer, do your best to satisfy these contingencies. That way, if you’re unable to, you can withdraw from the contract without penalty and be entitled to your good faith deposit. Also, not all contingencies are created equal. Some give sellers the right to remedy a defect, while others allow the buyers to withdraw from the contract for any reason at the end of the inspection contingency period. If you have questions about a contingency, ask your real estate agent or consult a real estate attorney.
Get It In Writing: Verbal agreements with regard to the sale of real estate are non-binding, so make sure you get everything in writing. This is particularly true before the purchase contract is signed. You contract is considered “ratified” after it is signed, and it becomes binding on behalf of both parties at this point. Usually, a signed purchase contract can’t be changed at this point unless you have agreement from the other party.
Renegotiation Can Happen: We just mentioned that a ratified purchase agreement is a legally-binding document for both the buyer and seller, but circumstances can change during the transaction that may result in renegotiation. Be prepared for this too!
Lender Required Appraisal: Sometimes, the buyer’s lender will require an appraisal of the property, which can come back lower than the purchase contract price. If that happens, the lender will be within their right to change the loan amount and lend less than they originally said they would. At this point, a buyer might ask for another appraisal, withdraw from the contract, or try to renegotiate a price with the sellers.