This article on the real estate contract is designed from a buyer's perspective. However, sellers may learn something from it too.
Are you considering getting into a real estate contract to buy a home, but feeling unsure about making a real estate offer? Is your fear of making a mistake blocking you from proceeding? I've always believed that the longer one takes to make a decision, the more difficult it ultimately is to make.
We humans sometimes tend to over-complicate things. We often think way too much. After you've considered all the pertinent facts and done the financial calculations, just follow your instincts. After you've viewed some homes, if one of them feels right and has most of the basic components you've been diligently searching for ...
I had buyers change their minds over-night about making a home offer, choosing against entering a real estate contract to buy their favourite home from the selection viewed. Occasionally, they even announced their decision to indefinitely postpone buying a home. They stepped back, sighed with relief at not having to change their lives by taking a leap of faith, and fell back into their comfort zone.
But at some point in time, usually a week or so later, the realization dawned on them that the same reasons existed for wanting to move in the first place. Nothing had changed. With deep regret for not having taken the plunge earlier, they then contacted me to begin the search all over again. This phenomena is referred to in the trade as ...
In the meantime, the home they fell in love with had sold to another buyer. Prices or mortgage rates may have risen and they hadn't been able to save enough down payment to compensate. Therefore, they either ended up buying a smaller home or accepted a higher mortgage payment.
I once had a lovely middle-aged couple walk into my real estate office and ask to view some homes. During the usual consultation regarding qualifications and before heading out, I learned they had been renting for many, many years. They had $100,000 safely ensconced in the bank and had never bought a home!!
At the time, they could have bought a detached house in the suburbs for under $75,000, a small fraction of their market value nowadays. Thus, affordability was not an issue - they had all cash! Even though they expressed the sincere wish to own a home and escape the perpetual rental game, they obviously permitted their fears to control their lives. Maybe, they were intimidated by the commitment of a real estate contract, or feared losing their jobs, hence their home.
I guess they never considered the fact that they'd have been
evicted for non-payment of rent far easier than losing possession of
their own home for non-payment of the property taxes and utilities, or
mortgage if they'd had one. When asked why they hadn't
bought years ago when prices were even lower, they replied that they'd
never found the right place. I suspected that the real reason was that they couldn't agree on a home, or maybe only one of them feared taking the big step.
Needless to say, and as I anticipated, they didn't buy any of the homes I showed them. They probably died as tenants. Maybe, they feared jumping into a real estate sale contract. How sad to never experience the joy and financial benefits of home ownership.
Therefore, when the right home comes along, don't hesitate to ...
Your buyer agent will prepare an offer for you. If accepted by the seller, this will become the real estate contract. All the clauses will be explained, so you'll not sign anything without understanding what you're signing.
Visit real estate contract terminology for an explanation of some of the more misunderstood terms typically found in a real estate sales contract.
First, you'll determine the various terms of your home offer. Since you're a client with your own agent protecting your interests, you'll have the advantage of ...
Of course, market value is an elusive figure. The ultimate sale price is almost impossible to accurately determine in advance. It's an educated guess based on previous sold comparable homes and of course, the market experience and knowledge of your buyer agent. The terms of a real estate contract, such as the number and type of conditions, possession date and other provisions, will affect the price a seller will accept. Often, but not always, the fewer conditions, the more attractive the offer is to the seller. Sometimes, the price may be acceptable, but the requested completion date doesn't work for them.
The other clauses in the real
estate contract will depend on your individual circumstances. The size
of your deposit will obviously depend on how much readily available
cash you have or can arrange. Keep in mind that the size of your
deposit is directly related to how much faith the seller will have in
your offer. Do you want your offer to be taken seriously? Offer a ...
It doesn't really cost you anything and it may encourage the seller to treat your offer more favourably. Also, your completion (possession) date will depend on when you're able to move from your present home, whether owned or leased. But be prepared to compromise when negotiating a real estate contract.
Is your present home already ...
This is a HUGE advantage when it comes to real estate contract negotiation. For example, you may be able to get a lower price if you're able to offer without a condition pertaining to the sale of your present home.
Have you committed to a particular date on the sale of your old place and the buyer can't or refuses to agree to change the date to accommodate your needs on your purchase? In such a case, you may want to consider bridge financing. Are you leasing an apartment? When does your lease mature? How much notice is required by your landlord? Living at home with parents? No problem - move anytime.
The principle issues of any suburban, city or rural residential real estate offer, whether freehold or condominium, are typically ...
... not necessarily in that order. Sometimes the completion date is more important to one of the parties than the price. Or a seller may not accept certain conditions, such as the sale of a buyer's property.
I've found that unless one of the parties is under duress, such as when a seller has already bought another home, or a buyer must vacate their present home by a particular date or is competing with another bidder for the same property, a real estate contract is usually balanced. It is a ...
If a buyer, for example, agrees to the seller's need for a particular closing date, in a balanced market, in exchange, a fair seller will compromise a little by agreeing to a slightly lower price. Or if a seller agrees to include his brand new kitchen appliances, the buyer may agree to pay a little more money. That's called ...
In practice, unless duress, competitiveness or a ridiculously heated market is involved, a seller rarely gets exactly what they want, nor does a buyer obtain their perfect terms in a real estate contract. However, a hot seller's market often results in the seller being very happy with the results. But they'll be less happy when suddenly, they realize they become buyers in the same hot market that favours sellers. Then the proverbial shoe is on the other foot.
Conversely, in a buyer's market, sellers are disadvantaged due to the substantial competition from numerous other comparable listings. Buyer's then have the golden opportunity of a great selection of homes offered for sale by many hungry sellers.
For example, in the Toronto real estate market and surrounding areas, over the past few years, the market has been such that listings in prime neighborhoods, particularly attractive unique freehold homes and popular condominiums, have attracted multiple offers to purchase. I was personally involved in situations, on both sides of the negotiating table, where 10 to 20 different buyers have aggressively competed to buy a particular property, with sale prices obviously far exceeding the asking price. Actually, it's been the regular practice of many agents to deliberately list property marginally below market value to encourage such a scenario. Great for sellers, but obviously less so for the frustrated buyers.
While I'm on the topic, sometimes it's a wise idea to fulfill certain conditions, such as home inspection and financing, in advance of actually submitting a real estate offer. This way, you'll not need to include these conditions in your offer, hence making it more attractive to the seller.
There's much to consider when making an offer and preparing a real estate contract. With a good agent representing you, the process will be far more enjoyable, successful and with ...
If you're considering buying or selling, with or without an agent, check out my book The Happy Agent. It contains the sum total of the real estate knowledge, philosophies and techniques that I've accumulated, practiced and polished during a highly successful 40-year realty career.
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