Negotiating
There are literally hundreds of points that you can negotiate in a real estate transaction,
and it is important to feel confident about negotiating with potential sellers, or there may be a
danger that a seller will talk you into agreeing to terms in a contract that are not in your best interest.
There are many potential points that can protect and enhance your purchase, including financing and
home inspection contingencies. Most purchase contracts, even if they are standard documents, contain
boilerplate language that may not fit your situation and may in fact be unfavorable to you.
Lake Oconee Brokers Real Estate agents will explain the language, so that you can make an educated
decision in order to make the best possible purchase decision.
There are two types of contingencies found in most transactions; a financing contingency, which makes the
purchase conditional on the buyers' ability to obtain a loan from a lender, and an inspection contingency, which
allows the buyers to have professionals inspect the property to determine potential property issues prior to entering a
binding contract to purchase. You could forfeit your Earnest Money deposit under certain circumstances, such as
by terminating a purchase without legal reasons provided for in the contract. In order to protect your position,
your Lake Oconee Brokers Real Estate Agent can make sure that the purchase contract contains provisions which
protect your purchase interests, including a clear and marketable title, having the seller agree to maintain the property
in its present condition until closing and making any agreed-upon repairs to the property.
Deciding what stays with the property is a negotiable item. If sellers want to take fixed items out of a house, they must
specify so in the sales agreement. Appliances that are not built in such as washer, dryer, refrigerator, portable dishwasher,
portable microwave, and freestanding stove are not automatically included in the real property, just as anything is else not
permanently attached to the property.
An earnest money deposit is a deposit paid by the prospective buyer of real property as evidence of the good faith intention
to complete the transaction. The amount can vary depending on the value of the property, and it serves as a source of
payment of damages to the seller if the buyer defaults. The amount of earnest money may also play into the negotiation
strategy your Lake Oconee Brokers Real Estate agent employs. Once the offer is mutually accepted, the earnest money is held
in trust by either the listing agent firm or the selling agent firm and is credited toward the buyer's purchase price at closing.
If the closing fails to occur, the defaulting party may lose any claim they have to the earnest money deposit.
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Contract Preparation
The Contract of Sale otherwise known as the Purchase and Sale Agreement is a legal document which binds the buyer to a
set purchase price and binds the seller to convey the title. The contract also services as the initial directions to the escrow
company to begin processing the transaction.
Sellers customarily pay for the real estate commission, title insurance, the State transfer tax, one-half of the closing fee,
some document preparation, and their portion of the year's taxes and assessments. Buyers customarily pay for ½ of the closing fee,
their portion of the year's taxes and assessments, and their loan fees. Occasionally sellers and buyers decide to share the
expenses of buying and selling. This must be negotiated during the purchase offer time and often depends on local real estate
market conditions, other terms of the purchase contract, and timing considerations.
Some lenders will allow a credit from the seller to the buyer for a portion of the buyer's nonrecurring closing costs. But they
usually won't allow a credit that reduces the amount of the buyer's down payment, or that includes any of the buyer's recurring
closing costs, such as fire insurance premiums, interest on the buyer's new loan, property mortgage insurance and property taxes.
Lenders' policies vary on how large a credit for nonrecurring costs will be allowed.
The closing date is stated in the contract. It is set in the original purchase agreement by agreement between the buyer and
seller. It is always nice to set a closing date that leaves you enough time to prepare to move in, and which doesn't cost you unnecessary money.
The date of closing can affect your closing costs (make sure to ask your lender for a good faith estimate).
Many times the seller will request to remain in the property after closing, in part to assure that closing actually occurs without the
seller having moved from the property. If that is the case, the seller actually becomes the tenant of the buyer after closing, so proper
documentation is needed.
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Home Warranty
Home warranties are becoming more of a standard in home buying and home selling transactions. The home seller may have already
purchased a home warranty. If not, you should consider buying a policy yourself at closing. Most home warranties will cover the cost for repairs or
replacement to most mechanical systems or most major built-in appliances for one year from the date of closing.
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Inspection
A professional building inspection will bring to light problems or repairs that are recommended to be made on the home.
The Sellers’ limitation for any and all repairs is a point of negotiation at time of contract. In the event that the estimated cost
of repairs exceeds this limitation, the buyer and seller enter into re-negotiations on how the repairs are to be addressed.
Your Lake Oconee Brokers agent is skilled at helping you achieve your goals during this stressful phase.
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Appraisal
An appraisal is an opinion of a property's monetary value usually completed at the request of the lender and for the lender's benefit.
Appraisers consider numerous factors such as square footage, construction quality, design, floor plan, amenities, energy efficiency,
lot size, topography, view and landscaping. Other issues taken into account are neighborhood quality and a property's proximity to
transportation, shopping and schools.
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Title/Escrow and Insurance
The final stage of a closing occurs with the transfer of title from one party to another. The commitment for title insurance is normally
ordered when the real estate contract is agreed to by both buyer and seller. The policy of title insurance is sent to the buyer by title
company agent after closing has occurred. The title or abstract company handles the escrow, which is a third party that transfers the
money and documents (including title and deed) from the buying and selling parties. The escrow company prepares documents, draws
up the closing statements, obtains necessary signatures, records documents and receives and disburses funds.
Now that you've found a home to purchase, you want to protect your investment with insurance. Most buyers get a comprehensive
homeowner's insurance policy, which provides coverage for fire damage, water damage, personal possessions, personal liability, vandalism,
theft, loss of use of the house, and many other coverage's, including personal property and furniture. If you are financing your home purchase,
your lender will require you to buy at least basic hazard insurance. Be sure to talk to your insurance representative fully about insurance options.
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After The Closing
Once you've bought your home, make sure to keep your papers in order and know your rights as a home buyer.
Of course, one of the best parts about buying a home is the tax break you receive from the government.
What's Deductible?
- Interest on your mortgage
- Property Taxes (but water or sewer assessment may not be)
- Some Closing Costs (including home inspections, appraisals or loan application fees)
- Loan points (deductible in the year that you pay them; in a refinance, the points are written off in increments over the term of the loan)
What Is Not Deductible?
- Home improvement Expenses
- Homeowner and Co-op dues
- Insurance Expenses
Note: Be sure to consult with your tax counsel about the tax benefits of owning your home.
For free publications from the Internal Revenue Service, call 1-800-TAX-FORM and ask for the following publications:
- 521 "Moving Expenses"
- 534 "Depreciation"
- 541 "Tax Information on Partnerships"
- 551 "Basis of Assets"
- 555 "Federal Tax Information on Community Property"
- 590 "Individual Retirement Arrangements"
- 908 "Bankruptcy and Other Debt Cancellation"
- 936 "Home Mortgage Interest Deduction"
Make a File
File all closing and settlement papers, including escrow papers, title report and your purchase and sale agreement.
Also file your loan documents, inspection reports and insurance information.
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