How To Negotiate A Contract
Contract negotiation is a strategy that plays a major role when selling or buying a home. Negotiating a home buying contract includes a number of factors that include, among other factors, the price of the home, financing, terms, and the date of possession. The negotiations may, or may not, include repairs and furnishings, or equipment. As part of the purchase contract, you need to negotiate the period of time you require to complete the inspections and investigations of the home.
Points To Consider
Of course as a buyer, when buying a home your main focus is always on the price. However, there are other things to consider when negotiating the contract, such as:
v Cost Of Transaction – You need to consider the various costs, such as the ‘brokers' commission, cost of home inspection, cost of termite inspection, escrow or attorney's fees, a title search, an owner's title insurance policy, transfer taxes and recording fees’, among others. The costs towards all these vary, depending on which part of the country the home is in. Who is responsible for paying what depends on the local custom, and can be negotiated.
v Down Payment – Your real estate agent can guide you about how much down payment to offer to the seller. It can vary from 5 percent to 20 percent of the purchase price. If your down payment is substantial, it may show your seriousness about completing the transaction. The seller, of course, will like to have as much money as you can put down.
v Mortgage Escape Clause – This is necessary from your point of view as a buyer, especially if you are obtaining a mortgage loan, and for some reason the loan does not come through. Without this clause, you will be legally obliged to purchase the house, even if you are unable to obtain financing.
v Real And Personal Property – The purchase contract needs to be very clear whether the final purchase price includes fixtures, furniture, built-in appliances etc, or not. Real property is anything that is permanently affixed to, or installed in the home. Everything else can be categorized as the personal property of the seller, though the distinction between real property and personal property is not a very well defined one. You need to negotiate and clarify these things in the contract very clearly.
v Breach Of Contract – A contract to purchase a home is a legally binding document. If for any reason you walk out of the contract that has once been signed, you are liable to lose your down payment. Similarly, the contract is binding on the seller too, if he tries to back out of the deal for any reason. Ensure that the contract specifies where the disputes need to be settled. It could be in a small-claims court or be presented for arbitration or mediation.
It is advisable to go through a standard purchase contract with your real estate agent, before making an offer of purchase. The standard clauses will prepare you for what to expect, and help in your negotiations.
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