What to Expect with an Offer
Know the “REAL DEAL” before you sign
The intent of this page is to provide New Hampshire clients with more knowledge and a clearer understanding of how things really work in a Real Estate transaction these days. What follows is a breakdown of the most important steps in a sale, including definitions, Common Misconceptions and what we call The Real Deal. The Real Deal explains how these concepts work in actual practice, so that sellers have realistic expectations and a good understanding of the sales process before they accept an offer. It is important to keep in mind that The Real Deal reflects how most sales go, but of course each sale can vary depending on the circumstances.
PURCHASE & SALE AGREEMENTS (P&S):
Definition – Typically a 5 page document that outlines all the terms of the offer (price, dates/deadlines, deposit amount, inspections, financing details, etc.) for the purchase between a buyer and seller. It is considered to be “legally binding” agreement once executed by both parties. The day the P&S is executed by the Seller is known as the “effective date”.
Common Misconception – P&S is hand delivered to listing agent by the buyer’s agent with a deposit check.
The Real Deal – P&S are usually submitted via email or fax directly to the listing agent by the buyer’s agent. Sellers can accept reject or make a counter offer. When both parties reach an agreement on the terms and the offer is executed by the seller, it is emailed directly to the buyer’s agent by the listing agent. Once it is executed by the buyer and seller it becomes a legally binding contract.
Definition – The deposit is also known as “earnest money” and it is commonly held in the escrow account of the listing brokerage (Lamacchia Realty in this case) when received. In most cases there are two deposits provided by the buyer and the amount of these deposits vary, the P&S indicates when the buyer will submit their deposit checks. The first deposit is typically received 3 days from the effective date. The second deposit, if applicable, will be submitted after the inspection stage is completed and the terms of the agreement are finalized.
Common Misconception – Checks are hand delivered from the buyer’s agent to the listing agent along with the Purchase and Sale agreement.
The Real Deal – It is customary for buyer’s agents to mail the deposit to the listing brokerage once the Purchase & Sale agreements are executed by both parties. As explained in our Escrow Policy, if a buyer defaults and there is any dispute over the deposit a mutually agreeable release must be executed by all parties before any funds can be returned to the buyer or given to the seller.
Definition – A Pre-Approval is a preliminary approval to obtain a mortgage. Buyers who plan to obtain a mortgage should provide this along with their offer.
Common Misconception – Buyers are completely approved for their mortgage once they have a pre-approval and nothing can go wrong.
Real Deal – PRE is the key part of pre-approval to pay attention to. A buyer cannot apply for a full approval until they find a home. If buyers provide a pre-approval from a reputable mortgage broker and company, chances are they will be able to actually obtain the mortgage, as long as they don’t have a life change such as job loss, Credit Change, etc.
HOME INSPECTION CONTINGENCY:
Definition – This is the period of time that buyers have to inspect the home and conduct their due diligence. The deadlines for inspections and type(s) of inspections to be conducted are illustrated within the P&S/Offer and commonly written as “within 10 days” or “within 14 days” of effective date.
Common Misconception – Buyers cannot attempt to renegotiate or back out of the purchase following or as a result of an inspection.
Real Deal – Home inspections are part of the buyer’s “due diligence” period, they are meant to identify and/or address major safety and/or structural issues with a home. After their inspection(s), buyers, depending on the results, will have the option to present questions and/or requests to the Seller and/or attempt to renegotiate terms; withdraw their offer; or proceed with no requests or changes to the current agreement. If issues arise in the inspection and both parties are unable to come to an agreement, buyers do have the right to withdraw their offer and they are entitled to the return of their deposit. If this occurs, we will advise you accordingly depending on the circumstances.
Once the inspection stage is completed the buyers will issue an addendum indicating they are releasing the inspection contingencies, either 1) with the following exceptions: (listing out the agreed upon remedies), or 2) and are moving forward.
Definition – An appraisal is an evaluation of a home’s value conducted by a licensed appraiser that is hired by the buyer’s mortgage company. The purpose of an appraisal is to allow the lender to ensure that the home’s value is enough to warrant a mortgage in the amount that the buyer is seeking.
Common Misconceptions – Buyers use this to get a lower price or it is another inspection.
Real Deal – Buyers have no control over the amount of the appraisal and it is not another inspection. Most of the time appraised values reflect the amount the buyer is willing to pay for the home. Appraisals sometimes come in too low; this is more apt to happen when there is a lack of comparable sales in the area. If the appraisal does happen to come in too low we will advise accordingly depending on circumstances.
MORTGAGE CONTINGENCY DATE:
Definition – A provision in the Purchase and Sales Agreement which specifies the date and time by which the buyers must have their mortgage commitment. Commitment dates are typically 7-10 days prior to scheduled closing date.
Common Misconception – If the buyers do not get their mortgage by this date the seller can keep the buyers’ deposit.
Real Deal – If buyers notify the seller prior to the contingency date that they need additional time to obtain their mortgage or that they were unable to obtain a mortgage, they can terminate the sale and get their deposit back. However, if the buyers are denied a mortgage
after the commitment date, and the buyer’s counsel failed to protect said deposit, the seller may be entitled to keep the buyer’s deposit. Please keep in mind that the Escrow policy with regard to the deposit would apply under these circumstances and each case is handled differently.
Definition – The date on which the deed is executed and ownership is transferred to the buyers. Upon signing the buyer now is the new homeowner and funds are transferred immediately.
Common Misconceptions – Seller can remain in the home after this date or schedule movers for the day of closing. This closing date can be easily changed after signing a contract.
Real Deal – The closing date is a firm date that cannot be altered unless there are unforeseen circumstances. Unforeseen circumstances could be classified as delays with the buyer’s financing or title issues that may prevent a seller from conveying “clear title”. In order to ensure a smooth closing a seller should always plan to move out at least 1 day prior to closing to allow the buyers an opportunity to complete a final walk-thru before signing the closing papers. The final walk through is typically scheduled for the night before or morning of the closing.
This document is for informational/educational purposes only and is not a predictor or guarantee of anything.
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