Law Office of Jennifer L. DiCarlo, PLLC

Tag Archives: offer

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Extra! Extra! The extras no real estate offer should be without.

As a real estate attorney frequently representing buyers, I rarely receive an offer for review before it has already been accepted by the seller. Unfortunately, in this scenario it can be very difficult to fix a poorly crafted offer after the fact. The seller may be adamant about sticking to the terms originally proposed by the buyer and reticent to let an attorney include more or different terms.

But, if a buyer comes to me before submitting their offer to the seller, there’s a lot I can do to beef up boilerplate terms. Buyers too often put misplaced reliance on their real estate agent when it comes to putting together their offer. After all, some might argue that memorializing the offer is a form of providing legal services – something best left to the attorneys. That said, I thought I would offer up my wish list of extras I would love to see become standard in all real estate offers. Here goes:

1) Appraisal contingency – if you are applying for a mortgage to finance your purchase, always include a provision in your offer requiring the property to appraise at or above the purchase price. This puts the seller on notice that you are not going to overpay for the property and gives you an out if value becomes an issue. In today’s volatile real estate market, value can become problematic during the appraisal if there are limited comparable sales or the property has unique attributes that can’t easily be valued.
2) Mutually satisfactory P&S – never settle on the parties executing a standard form or boilerplate purchase and sale agreement. By specifying that you’re only interested in the execution of a mutually satisfactory agreement, you’re acknowledging up front that you anticipate the parties, through their counsel, will be negotiating additional terms. Relying on standard form documents for the most important purchase of your life is a fool’s game.
3) Appliances and systems in good working order – if you’re paying top dollar for the property, it makes sense that you would expect all appliances and systems, such as the furnace, central air conditioning, and so on, will be delivered in good working order at closing. If you don’t specify this, you can expect them to be delivered in the same condition they were in at the time of your home inspection with reasonable wear and tear. If it’s a short sale, or post-foreclosure sale, that’s another story altogether. Most sellers in those cases will make no guarantees about appliance or system performance at closing and will typically require a buyer to accept their condition as-is. No matter what the case, be sure to also specify which appliances are to be included in the sale so there is no confusion about what is staying and what is going.
4) Mortgage Contingency – of course your offer is going to include a mortgage contingency. But, did you bother to check with your lender to confirm the loan amount and how much time they will need before a mortgage commitment will be issued? Make sure to doubleback with your lender before agreeing on dates. And, if your mortgage is going to be other than the garden variety conventional -type, be sure to specify that (i.e. FHA, VA, USDA, etc.). FHA and other federally insured loans have additional requirements and additional paperwork and certain buyer-protections that a seller may want to know about when assessing an offer.
5) Inspection Contingency – now while almost every boilerplate offer form I’ve ever seen includes an inspection contingency provision, they often don’t get into the specifics of inspections or provide for instances where test results may be delayed and will require time for assessment. If you are planning to have a property tested for radon, for example, you’ll want to be certain that you are going to be able to collect the sample, send them off to the lab and have time to analyze the results all before the contingency expires. If you won’t have enough time, then be sure to modify your offer to account for these sorts of items. Another big one involves private well testing. Not only will you need time to have the well tested, but you’ll want to ensure that the results meet established minimum water quality standards like those established by the EPA or the local Board of Health. If they don’t, you’ll want the opportunity to either terminate the deal or require the seller to rectify the water quality issue.
6) Property to be delivered vacant – this is particularly important if you are buying a property occupied by tenants and the expectation is that it will be delivered vacant at closing. Alternatively, if some or all of the tenants are to remain, it is incumbent on the buyer to inspect rental agreements and obtain information about security deposits and last month’s rent from the seller. These demands for information should be set forth in the offer. It will also be vital to find out which appliances belong to the tenant or to the seller as the former won’t be included in the sale of the property.
7) Review of condominium documents – if the property is a condominium unit, the buyer should specify that the transaction is subject to the seller providing the buyer with all of the current condominium documents including, but not limited to, the master deed, declaration of trust, bylaws, rules and regulations, recent meeting minutes and budget. Issues commonly come up with respect to the terms and conditions under which a condominium unit may be rented should the buyer want to do so now or in the future, parking and pet ownership. These can be deal breakers for some buyers. The condo documents will shed light on these items. It’s important not only to specify what documents the buyer wants to review, but also set deadlines by when the documents will be provided and buyer’s review will be completed. An offer for a condominium that has a mortgage contingency should always specify that the transaction is conditioned on the unit being Fannie Mae warrantable. And, buyers should always ask for seller’s to disclose the monthly condominium fees and any pending or planned increases or special assessments as these will impact the buyer’s financing and bear on their financial situation directly.

While the above list is not exhaustive, it should help you get started when thinking about all that has to be done in order to purchase real estate. Every Massachusetts property is unique and should be reviewed with care in light of crafting an offer. I always encourage prospective and returning clients to contact me early so we can proactively approach the offer stage in order to remove barriers further down into the process. Fine-tuning an offer to address the buyer’s expectations also helps to manage the seller’s expectations and promotes a smooth transaction and property turnover.

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In the World of Real Estate, Timing Is Everything

Interest rates are up, and then they go down.  Prices fall sharply then, almost overnight, they’re on the rise again.  For some, it’s all just a matter of timing.  You took the time to save up your down payment, now you’re ready to find your dream home.  The money’s in the bank, you’re prequalified and you’re working with an agent.  Will your dream home be out there now that you’re ready?

The same holds true for the inner workings of a real estate deal – it’s all just a matter of timing and sometimes timing is everything.  Having been involved in hundreds of real estate transactions, the one thing I’ve found to be consistent with the smoothest ones is the fact that the timing from submission of an offer to passing papers at the closing table has been calculated with some level of precision.  The buyer wasn’t succumbing to pressure to close the same month their lease was expiring or some date fixed by the seller to accommodate their vacation schedule and the lender wasn’t promising to deliver according to some unrealistic deadline just to get the loan.  Instead, a set of very achievable deadlines was chosen for each of the major steps of the process after consultation with all of the necessary parties and consideration of all that must be accomplished before a closing can occur.  This is the way real estate transactions should always be handled.  But, that’s rarely the case.

Often when an offer comes across my desk for review, it’s already been accepted and that was after some negotiation back and forth.  The first thing I always look at is the timing of the transaction.  When is the home inspection deadline?  When do the parties need to execute the Purchase and Sale Agreement?  What date did the buyer’s agent include for the application and mortgage contingency deadlines?  When are we closing?  Is there enough time to get the tax and title information, resolve title issues and prep for closing?  Or, are we going to be requesting extensions of all of the deadlines right out of the gate?

If there was some back and forth between the parties, it’s typically not because of timing but more a matter of pricing or inspectional issues.  The parties hash out their differences and the offer gets modified with a new price, or some seller concession.  But, the parties never bother to revisit the dates of the original offer and now it is one week, two weeks or even longer since it was first submitted.  Those original deadlines have now been shortened and we’re not even at the Purchase and Sale Agreement stage!  Furthermore, the buyers may not have even had a full conversation with their lender about how much time it will take to process their mortgage application, order and review an appraisal, review title issues and so on.

The agony that ensues because of poorly chosen dates is difficult for any of the parties to deal with.  Often a title examination requires additional work because of possible defects or a complicated history.  This then delays the issuance of the mortgage commitment, which in turn holds up the lender from clearing the loan to be closed.  If there are true title defects, it can take weeks of discussions to come up with possible resolutions.  Not only can this slow the mortgage process, but it can drive the whole transaction to a screeching halt.  The ramifications go on and on.  Imagine the scenario where the seller has already gone and put a replacement property under contract with the intention of using the proceeds from the sale of their existing home, which may or may not close in the near future!

So, what is the answer?  There are three actually:  planning; diligence; and flexibility.  When making and accepting offers, the parties must plan well by reviewing their needs, the lender’s needs and those of other affected parties as well as considering how much time is needed to complete the various tasks.  The parties, especially the buyer, must be diligent in responding to document requests from their lender, timely completing inspections and other due diligence and maintaining constant communication with their attorney, agent and lender.  Sellers need to be diligent about making negotiated repairs or vacating the property.  Finally, the parties must be flexible.  They have to understand that despite negotiated deadlines and best efforts, some transactions just can’t close on time as originally planned due to issues that could not be foreseen or resolved as quickly as desired.  If the parties contract with each other installing these three attributes into their transaction, a successful closing will not be too far off.

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