Contract Drafting, Signing & Negotiations for Marketing

Instructor: Kyle Aken

Kyle is a journalist and marketer that has taught writing to a number of different children and adults after graduating from college with a degree in Journalism. He has a passion for not just the written word, but for finding the universal truths of the world.

Contract negotiations can be one of the most important steps in the real estate buying or selling process. There are many specifics that should go into a contract as well as methods for bargaining with the other party. The most important part of this process is research of information, industry standards, and comparables.

What Should be in a Real Estate Contract?

Price - This is an obvious requisite for any real estate contract. There will often times be an initial offer (from the buyer) that is different from the list price (set by the seller), which may or may not be followed with one or more counter offers (from one or each party) until a price has been agreed upon and the two parties go into contract.

Closing Costs - Closing costs average anywhere from two to five percent of the buying price of the home. This is negotiable between buyer and seller as to who pays and/or how much each party will pay. Different market standards may change this, but often buyers and sellers will find a way to split closing costs.

Closing Date - Most all real estate contracts will include a date by which closing must occur. Sellers want to negotiate this date for a speedy close, and buyers should consider monthly budget once in the home. Typically, 'when a buyer closes on the house, they skip the next month's mortgage payment' (Murad, 2016). For this reason many buyers prefer a closing date at the start of a month so they can skip that mortgage payment.

Financing Contingencies - This states that the offer made on the home is contingent upon the buyer's ability to secure financing on the home (unless a cash offer is made). If a buyer wants to negate or drop the financing contingency, then they should ensure that they are fully approved for their mortgage before placing an offer. This will guarantee that they are financially capable of closing on the property.

Home Warranty - This is an optional part of the contract that can be added by either the buyer or seller. This section may cover items such as appliances and systems should they break within a certain time period of closing.

Leaseback - This may occur when the seller could need extra time to move into their new home. It is often a clause included by the buyer to give the seller peace of mind. If the seller needs extra time to move after closing, then they can rent the home from the buyer for typically thirty to ninety days.

Home Repairs - This is to ensure that any damaged items or areas of the home will be fixed. It can be paid for by the buyer or can come off of the total price of the home. The dollar amount for home repair can vary by market and comparables. A seller does have the option to sell the house 'as is,' stating that they will not make or pay for any possible repairs.

Appraisal Contingency - This states that if the appraiser comes in and values the home at lower than the purchase price, the buyer may exit the contract. Sellers sometimes aim for the buyer to waive the appraisal contingency, but this typically only happens with a mortgage and not cash buyers. However, if an appraisal falls short in the case of a mortgage, the bank may only lend the buyer the appraisal amount.

Appliances - This section of the contract will specify what appliances will or will not stay in the home upon closing. This most often includes kitchen appliances, washing machine, and dryer.

Furniture - This occurs less frequently than appliance clauses but is sometimes included in contract negotiations but can include items like patio furniture and may even specify fixtures such as chandeliers or cabinets.

Inspection - The home inspection can be waived, but it is often a mistake by the buyer. If a buyer wants to better the contract terms for the seller, they may shorten the time period for the inspection to take place.

Condo/Co-op Assessments - This is used for the maintenance and/or repair for a property's common areas such as a roof. Sellers should settle if there is an open assessment, however this is totally contingent upon the preferences of both the buyer and the seller.

Tips for Contract Negotiations

Break Negotiations into Parts - This is preferable to an 'all or nothing' approach as the buyer and seller are able to negotiate on each part of the contract separately.

Take a Fair Approach - This is when one of the parties reiterates that their contingencies are up to par with industry standards and/or standards of the property's comparables. If one party is negotiating according to fair standards, the burden is left to the other party to convince them why they should veer away from those standards.

Get to the Yes - This approach helps to create viable options for both parties. It encourages them to work together to create a contract that helps to make both the buyer and seller feel comfortable. This helps to neutralize conflict by focusing on objectives and not playing off of the emotions of either party.

Practice Control - Even small things like timing, location, and specifications can make a big difference when they are controlled by one or both parties. Having control over the details helps both parties to feel they have control over their decisions pertaining to the contract. Know what topics need to be discussed and when they should be settled.

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