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Negotiations
Q. If the seller counters our offer, do we have to accept?
A. No. You have three options. You can reject the seller’s counter offer and walk away from negotiations. You can accept the counter as the seller wrote it. You can create a “buyer’s counter” offer (which typically attempts to modify some of the seller’s requests into something more acceptable to the buyer.)

Q. If the seller rejects our offer, can we submit another one?
A. Yes. Usually a seller will counter what they consider a reasonable offer. However, if the offer is refused, you can start from scratch and write a totally new offer. An offer far removed from the seller’s goal can gender an emotional reaction and a psychological obstacle to much more negotiation. So, it’s best to really give it your best shot the second time around, because the owner may not hang in for round three.

Q. What if the seller doesn’t accept the requests we make for repairs?
A. The short answer is that you can (usually) walk away from the deal (with your earnest money) if your requests were in line with typical Real Estate procedures. But if you don’t want to loose the house, and are willing to proceed without the repairs, you may have the option to proceed. Immediately after the inspection there is typically another round of negotiations. This is where a Realtor with good negotiation skills can be of great assistance in keeping a deal together and moving forward.

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Earnest Money
Q. How much should we put up for earnest money?
A. Some realtor’s suggest 3-5% of the purchase price. I think it depends on all the other factors detailed in the offer. If the price offered is close to the asking price, the buyer is pre-approved, can meet the seller’s needs for closing and has no unusual terms, a smaller earnest money deposit can be considered. If there is anything that would make the seller perceive the buyer or the offer as somewhat “weak”, I suggest a stronger earnest money deposit. The deposit needs to indicate that you are “earnest” about your desire and intent to buy. To do this, it must be an amount that a typical person would not walk away from simply because she/he got cold feet or found another house. Likewise, if a person did have a change of mind or found a more preferable house, the earnest money needs to be enough that a seller would feel reasonably compensated for the frustration of having taken their home off the market and then starting all over again.

Q. Does the earnest money go toward our down payment?
A. Yes. At the time of closing, the earnest money becomes part of the down payment and/or is applied to your closing costs.

Q. If the deal falls through, can we get our earnest money back?
A. It depends on the terms of the contract and why the deal fell through. In short, there is no way to state definitely yes or definitely no, without knowing the terms of the contract.

The following examples cover some situations in which the earnest money is refunded, and some in which it isn’t.

Example 1) The contract stated that the buyer and the home must qualify for a specific type of loan. The buyer cooperated and did what was expected to obtain a loan yet for reasons beyond the buyer’s control the loan wasn’t approved. The earnest money would typically be refunded.

Example 2) Upon inspection, an otherwise perfect looking house was found to have serious flaws in the foundation. The seller refused to have it repaired or make price adjustments. The way most contracts are written, the buyer could walk away with the earnest money.

Example 3) A buyer found house they liked better and withdrew from a deal a week prior to closing. Typically, the earnest money would be forfeited.

Example 4) The buyer insisted the seller install new vinyl windows, but the seller refused. The existing windows were dated, but their replacement had not been part of the initial negotiations and was not warranted by standard inspection procedures and Real Estate practices. If the buyer withdrew from the deal on that basis, the earnest money would probably be forfeited.

A good Realtor can advise you how to craft a legitimate deal to protect your interests. He or she will also instruct you as to the risks and responsibilities inherent in decisions that are made at various stages of the purchase process.

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Inspections
Q. Who pays for the inspection?
A. The buyer. The inspector works for the buyer, and the inspection report belongs to the buyer.

Q. What if the inspection finds lots of necessary repairs?
A. You may enter into negotiations again with the seller. Your Realtor can advise you which repairs are reasonable to request of the seller. However, the seller is not obliged to do any repairs (unless it is specifically stated in the original contract). If an agreement cannot be reached about the repairs, the buyer can usually withdraw from the deal with the earnest money intact.

Q. Who pays for the repairs?
A. It all depends on what is agreed to as part of the negotiations. Generally speaking, the repairs that enter into negotiations are handled and paid for by the seller. However, it can be handled by a cash credit being given to the buyer at closing so the buyer can get the repairs done after possession of the property. The repairs can be paid partly by the seller and partly by the buyer. You want a good negotiator representing you when the inspection calls for repairs.

Q. What if we decide we need additional inspections?
A. If it is within the time allowed for inspections, additional inspections are typically permitted. However, in some cases, you must identify in advance which inspections you reserve the right to have done.

Q. Who does the repairs?
A. Who does the repairs and when they get done is determined by the terms negotiated. For example, the buyer may specify that repairs are to be done by licensed contractors, or may state they want to choose from three bids obtained by the seller.

Q. Can we get back inside the house to re-inspect after repairs are done?
A. Typically you can. You certainly can if a re-inspection clause was included the repair negotiation addendum.

Q. What if we aren’t satisfied with the way the repairs were done?
A. The repairs must meet the terms of the contact, and must typically be done in a manner considered to be industry standard. However, this can turn into a sticky issue, and is best handled by clearly stating in writing what is expected during the negotiation stage.

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Cold Feet/ I changed my mind
Q. Can I back out if I change my mind?
Q. What if I see a house I like even better before the deal closes?
Q. What if we don’t want the house after the inspection?

A. The answer to all of these questions is the same. You can almost always back out of a deal. The real question is – how much will it cost to get out? The answer to that often depends upon the stage of the process. For example, if you change your mind while your offer is on the table and the seller has not yet accepted, you can probably get out fairly easily and with all your money. If you don’t want the house after the inspection, and it’s because of some tangible defect in the property, you can probably get out and take your earnest money with you. If you change your mind the day before closing, because you found a house you like better, you may be faced with a law suit that requires you to complete the deal and pleads for compensation for emotional damages!

A mutually agreed upon offer to buy/sell Real Estate is a legal contract. It should not be taken lightly and should be treated seriously. It is a complicated contract that has many “if, ands and buts” – most of which create more loopholes for the buyer than for the seller. However, it is essential that you adhere to all the terms of the contract and the dates stipulated to maintain a valid contract and to protect your interests. A good Realtor will help you understand everything along the way.

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Appraisal
Q. Do I need to get an appraisal?
A. If you are obtaining a loan, your lender will insist upon an appraisal. They don’t want to lend you any more than the value determined by an appraisal.

Q. When is the appraisal done?
A. I suggest the appraisal be requested after any necessary negotiations are completed after the inspection. If something is found during the inspection that will “kill the deal”, there is no reason to have an appraisal.

Q. How much does it cost?
A. Your lender picks an appraiser from a list of those with whom they are willing to work. The costs vary from one lender to another. Typically, it will be between $300-$500. Ask your lender for the exact amount.

Q. Who pays for it, and when?
A. Because the appraisal is a condition of sale imposed by the buyer’s lender, the buyer pays for it. The buyer often pays for it at the time it is requested. Some lenders don’t require payment in advance, but simply add it to the costs that get paid at closing through escrow.

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Escrow and Title
Q. What is escrow?
A. Escrow is service (usually handled by a Title Company) which acts as a neutral third party, handling money for both sides of the transaction. Escrow releases money only when all the terms of the contract are satisfied, and only according the to terms stipulated in the contract.

Q. What need do I have for a Title Company?
A. You want a title search done on the property you plan to buy. This assures you that the seller has the right to sell it to you, and that there will be no other claims against the property after you’ve taken possession.

Q. Who pays for the title search and for title insurance?
A. The buyer pays title insurance that covers the buyer’s interest.

Q. Who decides what escrow company and/or Title Company to use?
A. Typically, this is decided by the listing agent and/or the seller.

I hope these Q/A’s helped clarify some of your concerns about the buying process. If you have more questions, I’d be happy to help you.

Give me a call today (503-319-4777)
or e-mail me at RealtorInquiry at AmoveInTheRightDirection dot com

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