The Residential Real Estate Contract, used by REALTORS in NWA, is a legally binding document with a lot of moving parts. The document is changed and updated on a yearly basis so it may look and read differently from the last time you saw it. Plus, it’s likely the last time you reviewed this document you were a buyer.
So, take a moment to familiarize yourself with the major parts of the NWA Residential Real Estate Contract.
TERMS & TOPICS TO KNOW
Remember, agents are authorized to fill in the blanks of this form but are not able to make changes to the contract itself nor interpret the contract for you. Only an attorney can do that.
Therefore, we suggest you ask your agent for a blank copy to review prior to receiving offers. This way, if you have questions about the terms of the contract you can seek legal counsel now before you are under a strict offer expiration deadline.
Look at the expiration date and time (located on the last page of the contract). This will tell you how much time you have to evaluate and respond to the buyer. This is important to look at first because the time you have to respond could range from mere hours (in a hot market) to multiple days.
In order for a contract to be valid, the buyer needs to receive your response before the offer expiration. Therefore, when planning out your response, remember to factor in the time it will take for all parties (you, your agent, and your broker) to sign an acceptance, or create and sign a counter-offer, and get it successfully to the buyer’s agent before the deadline.
Of course, the first thing you’ll want to do when you get an offer is go directly to Section 3 of the contract and look at the offered purchase price! Everybody does!
But, before you get too excited (or disappointed) with the offered price, be sure to read through the entire offer. There are many other parts of the contract that can affect the amount of money you’ll net from the sale.
Therefore, look at the offered purchase price in conjunction with any requested seller concessions to assess what the actual offer is from the buyer.
Any conditions outlined in the contract that require a seller to do something, or pay for something, is called a seller concession, such as when a buyer asks you to help pay some of their buyer closing costs or provide them with a home warranty.
Your net profit is the total amount of money you will walk away with at closing once all transaction expenditures have been accounted for. Your net is derived by taking the purchase price on the contract and subtracting the price tag of any concessions (+) your current loan payoff (+) any additional seller paid closing costs (such as real estate fees).
You can use this handy Seller Net Calculator to see if the terms of the offer meet your overall financial goals for the sale of your home.
While an offer is nice, you want to know if the buyer is serious and can afford to purchase your home. If you need additional information or support documentation to evaluate the strength of an offer, then request it from the buyer’s agent.
Did the offer come with a pre-approval letter showing that the buyer can get a loan for the amount offered? If the offer is for cash, does the potential buyer have proof of funds? If the buyer has a contingency, how likely is it that the contingency can be removed in a timely manner?
How strong you feel an offer is, and how much weight you give to each section of the contract, ultimately depends on your circumstances and what’s important to you.
Do you need to close quickly? If so, perhaps you are willing to accept a slightly lower purchase price from a buyer who can close ASAP.
Are you willing to complete lender required repairs if necessary? If not, then you may think twice about accepting an offer from a buyer who is getting an RD, VA or FHA loan.
Have you already moved out of state? Perhaps a buyer who is willing to accept your home as-is and eliminate the need for you to manage long distance repairs is a great fit.
Evaluating an offer can be an emotional experience. It can be exhilarating to receive a great offer, overwhelming to receive multiple offers, or equally frustrating to receive a low offer.
Think of an offer as a list of conditions under which the buyer would like to purchase your home. It’s their wish list, but it doesn’t mean you need to accept them, especially if their wishes are not in line with yours. It’s common for buyers and sellers to enter into multiple rounds of negotiations, so thoughtfully evaluate every offer, even if your goals seem too far apart.
Remember, it’s quite common for buyers to point out some of the flaws of a home in order to justify why they are offering a lower purchase price. However, few buyers intentionally wish to offend the seller they are trying to buy a house from.
Therefore, do you best to keep your emotions at bay, keep the lines of negotiation open with all parties, evaluate offers as business transactions, and respond apprpriately.
Contract negotiation is the process of bringing two opposing parties into agreement. However, it’s likely you will never meet the buyers of your home. This can make the negotiating process a challenge because you know very little about the person on the other side of the table.
Therefore, if you plan to send a counter-offer, it’s nice to have your agent do a little research to see what parts of the contract are most important to the buyers. If you can present a counter that is a win-win for both sides, the buyer is more apt to accept.
Remember, your agent puts deals together all the time. He/she is an expert in dissecting contracts for buyer clues and negotiation strategies, so rely heavily on him/her to lead the way.
After you’ve evaluated the offer, there are 3 ways to respond.
If the buyer agrees to your counter, your home is under contract. If the buyer does not accept your counter, he/she can either submit a brand new offer to you (which you can then accept, reject or counter) or move on to a different property.
As you can see, this process can end quickly or go on for multiple rounds.