Real Estate Sales Contract Review
Both buyers and sellers should have an experienced Florida real estate lawyer review an agreement of sale BEFORE they sign the agreement. Once the agreement is signed, it becomes much harder to negotiate any changes. In most cases, buyers will offer much less than the listing price. The listing price is mainly the starting point for negotiations. Buyers have two concerns when offering a purchase price. The first, is will the seller accept the price. The second is what offers are being made by other buyers. All things being equal, such as the ability to obtain a mortgage, the seller will agree to sell to the highest bidder.
According to South Florida Business Journal, the median price for the sale of a single-family home in Florida for 2017 is $242,000.
Standard real estate contract sales clauses
A typical real estate contract agreement will include the following items, most of which can be negotiated:
Identification of the property
The identification includes the address and description of the property being sold. Experienced legal counsel will review the agreement to determine exactly what is being sold and what isn’t. For example, is the swimming pool being sold. Are removable items like back-door sheds being sold? Are the appliances such as the refrigerator being sold.
The purchase price for the property
Most residential agreements of sale start with a boilerplate form. The main item that gets added to the contract is the agreed upon purchase price. Sellers should understand that the listing price is not determinative of the sales price. If a home lists for $200,00, and there are multiple offers, the seller may be able to bargain for more than $200,000. If a home needs repairs, then buyers will likely offer much less than the listing price. Sellers do not have to accept any offer. They can reject offers that match or that exceed the listing price. Once a seller signs the real estate contract, he/she must follow through with the sale.
The amount of any down payments and the form of the down payment. Is a check sufficient or should the down payment be a certified check, money order, cash or other asset?
A mortgage contingency clause
Few buyers can afford to pay cash. Most need to obtain a loan in order to buy the home. Most creditors will only give a loan for a home purchase if the borrower also agrees to give the lending company a mortgage. A mortgage is a legal document that gives the lender a security interest in the home. A security interest, in turn, means the lender can repossess the home if the loan is in default. A mortgage contingency clause means that the buyer is not obligated to go through with the purchase if the loan and mortgage aren’t approved. Buyers usually demand a mortgage contingency clause. Sellers normally want the buyer to move quickly so they agree to the mortgage contingency provided there is a mortgage approval decision in a specific time frame such as 30 or 60 days.
Many home buyers these days are seeking precertification of a mortgage so they have a better idea if they can really afford the home.
The amount of the deposit and forfeiture of the deposit. Most real estate contracts require that the buyer pay a deposit. The deposit should essentially cover the seller’s losses for taking the property off the market. A key provision in most real estate contracts is what actions or inactions by the buyer will require that the buyer forfeit the deposit – and when can a buyer request a return of a deposit.
Issues for different types of property
If a condominium or co-op is for sale, then the seller may need the approval of the condominium owners or co-op association.
Other issues may apply depending on whether the property is a single-home, duplex, townhouse, or other structure.
The length of the offer
Buyers can require that sellers respond to their offer with a set period of time such as two days – or the offer will be taken off the table.
Additional real estate contract clauses
Other clauses your lawyer should review are:
- When settlement should take place.
- When a buyer can move into the home. Sometimes a seller wants to stay in the home until his/her purchase of a new home is complete
- Who will hold the deposit money – normally a third-party escrow agent
- Who will be the closing agent – usually a title insurance company
- The requirement the seller will give the buyer clear title – normally through a title insurance policy
- The right of the buyer to conduct a home inspection by a reputable professional home inspector and the time for this inspection. The sale may be contingent on a successful report.
- The right of the buyer to conduct a walk-through the day or so before the closing date
Additional real estate contract clauses that are subject to negotiation include damages if the seller doesn’t move on closing date.
Both seller and buyer can make counteroffers until an agreement is reached.