Chapter 6: Close The Agreement
Move quickly to offer your bid once you've found the house you want. Talk to your buyer's broker (if you have one) for advice on making an initial offer or come up with your own strategy when dealing with seller's realtors.
Making an offer
The best way to come up with a price is to get the selling price of at least three houses in the area and find the difference between what was originally asked for and what was actually paid.
If the average turns out to be around 5%, you know that you can offer 8% to 10% below what is being asked. This will give you room to negotiate. Don't go too low if you really want the house, you may put the seller off completely.
What is happening with house trends, as this will affect your offer? If houses were selling 10% below list price last year and 3% above this year, you would be wise to offer just 5% below asking.
There is no single way to bargain for a fair price. Sometimes working directly with the seller is best; other times its best with intermediaries. Try to develop and maintain trust as a good deal will rely heavily on trust.
Think of creative ways to meet the seller's needs. For example, offer to meet their price if they include household appliances like kitchen and laundry equipment. Or you can also ask for a lower price if they take those things with them. Remember that the market will have a huge effect on your leverage. If the market is slow, you will have a lot of bargaining power; if it's not, you may have none.
Looking over the purchase agreement
The seller's REALTOR® will usually write up a purchase agreement once a mutually acceptable price has been reached. It will include the estimated closing date (generally between 45 and 60 days from acceptance of the offer).
A lawyer or the buyer's REALTORS® should look this document over to make sure that the deal is dependent upon:
- • You getting a mortgage
- • A home inspection that process there to be no defects of significance (significance should be defined)
- • An agreement for you to conduct a walk-through inspection within 24 hours of closing. This lets you check the house after the sellers have emptied the house and you can ask for payment for repairs. There is a chance that movers will cause damage or that furniture was hiding unsightly damage.
A good faith deposit usually has to be made. This is generally 1 to 10 percent of the house price. It should be placed in an escrow account and given to the seller once the deal closes or returned to you if things fall through. Bear in mind that you can only get it back if the home did not meet any of the contingency clauses.
At this point, you can call your mortgage broker and finalize terms. You will need to decide on an adjustable or fixed-rate mortgage and whether to pay points.
There will be two fees to pay at this point: a credit check (around $50 to $75) and a house appraisal ($150 to $300). These fees are generally due at closing.
If you don't have it already, homeowner's insurance policy should be opened. Get recommendations from your lawyer, realtor or friends. You can also try InsureMe , a free insurance referral service. Most lenders insist on homeowner's insurance before a loan can be approved.
Late deals
Your own independent home inspector should check out the home in addition to the appraisal for the lender. Referrals are best gotten from friends or a trade group like the American Society of Home Inspectors. Fees for an inspection generally run between $200 and $350 and it will take around 2 hours.
Insist on being present while the inspection is being done - this way you will learn a lot about the home and its overall condition. Your also learn about its construction, wiring and heating. Ask your lawyer to discuss any concerns that arise with the seller. Issues will either need to be fixed or the repair costs deducted from the final price.
Close to two days before closing, expect your lender to give you a final HUD Settlement Statement listing all charges due by you at closing.
Review this document carefully. The things it will include are title insurance, which exists in case anyone claims to own the property. This usually runs around 1% of the house price although it does vary.
It is possible also that your lender may ask you to set up an escrow account with one or two months mortgage payments in it in case you fall behind on mortgage or property tax payments.
Once you have gone through all of the above, the closing can end up being a bit anticlimactic. It is somewhat of a ritual although some might still find it nerve-racking. The process differs region by region but your lawyer or REALTOR® can fill you in on the details.
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Chapter 7: Important Advice For Sellers
