Colorado Springs Real Estate Contracts Guide – Contract Negotiations
Both parties have to agree upon all terms of how the property is going to be transferred. This is all identified during contract negotiations. It is important to go through this process with Realtors in the middle. Why? Because a professional Realtor will keep your motivations confidential. If a Buyer or Seller interfaces with the other Realtor, anything you say can and will be used against you in negotiations. (Unless the Realtor is a Transaction Broker*)
Parties Must Agree to the Following:
- What is the price of the home?
- What is included with the home? Washer, dryer, refrigerator, curtains, swing sets, hot tubs, etc.. are common negotiation items.
- Does the buyer have a home to sell before they can buy?
- How long does the seller have to get documentation (covenants, title commitment, disclosures, etc..) to the buyer and how long does the buyer have to review it?
- How long does the buyer have to review the condition of the home and how long do both parties have to come to agreement on what/if anything will be fixed?
- How long does the buyer have to make sure the property is insurable?
- If a survey is required, who pays for it and when is it due?
- When is the appraisal due, who pays for it?
- How long does the buyer have to review their loan?
- When is the property going to change hands and possession?
Parties Must Be Reasonable
As you can see, there is a lot to cover in the contract! Sellers need to give buyers reasonable amounts of time to get their discovery done and buyers need to be sensitive to the fact that while they are doing their discovery, the seller is losing days on market so they need to get things done quickly to be sure they want to move forward.
Colorado Springs Real Estate Seller:
First and foremost, make sure your agent asks for a pre-approval letter. You want credit checked and assets verified before you accept their contract. You want to make sure they are well qualified so you don’t lose a month or more of on market time.
If they have a home to sell, have your agent run a market assessment on the home and review the home in person. If that home doesn’t sell, your buyer doesn’t buy.
Remember that each item above allows the buyer walk away and get their earnest money back. You want these dates as short as possible so that you:
- Limit lost days on market
- Can move out with a relatively safe understanding that closing is actually going to occur and if it doesn’t, you will at least retain the earnest money as damages.
Colorado Springs Real Estate Buyer:
Read my note to Sellers. Have a pre-approval letter before you write your offer. Your offer will carry more weight the more serious you can prove you are. The longer you have for discovery, the safer your earnest money is.
I often see pricing based on nothing more than a sellers wish instead of factual data. Be sure your Realtor runs a value assessment on the property for you. If comparable sales do not support the asking price, be sure your Realtor includes that information with your offer so the seller can see your offer is based on data, and not mean spirited. (you have a better chance of getting closer to your asking price) “Lowball” offers are not a productive use of anyone’s time and only creates friction which will make it harder for parties to come to agreement.
If you have a specific question not covered on this site, please contact me.
Negotiation | Title Review | Inspection | Survey | Insurance | Appraisal | Loan Conditions | Walkthrough | Closing
From Contract to Closing
How To Buy A House In Colorado Springs | Selling A House In Colorado Springs
*A transaction broker is a Realtor that is representing both parties in the same transaction and typically occurs when a buyer who does not have a Realtor calls a listing agent directly and wants to purchase a home. In these circumstances the Realtor CANNOT discuss other parties motivations and also cannot make suggestions on pricing and terms. They MUST remain neutral and their only job is to fill out forms and advise of obligations because of the forms.
Colorado Springs Sellers Guide – Contract Negotiations
Woo hoo! All your hard work has paid off and you got an offer! First and foremost, congratulations! Now, you just have to get the buyer to be reasonable in what they are asking for and what they are willing to pay.
The first thing you should understand is that the contract is between you and the buyer. The Realtors just fill them out (or counter) on your behalf. This is YOUR contract. Second, understand the general position of the standard Colorado contract: It gives the buyer all the power. Once you sign that contract, you are at the mercy of the buyer. So make sure it’s right before you sign anything.
Here are a few things you should know BEFORE you start negotiating:
- NEVER entertain a verbal offer. It’s not binding and is a waste of time and something could be assumed that would just cause problems later. If they want to make an offer, it MUST be on paper and SHOULD be on the standard Colorado contract.
- Make sure you have a pre-approval letter from the buyer. Pre-approval is where they check credit and verify assets. Pre qualification letters are pretty weak. You need to know that they can perform.
With Regards to contract review, here’s a general guide as to what to look for:
- What are they offering? That’s kind of a “Duh” statement but make sure to include any closing costs they are asking for as part of what your bottom line will be. It has become customary for closing costs to be paid in part (or full) by sellers. Think of it as buyers “financing in” their closing costs for 30 years. Not OK with your bottom line? Just counter the price higher so you get where you want to be. That buyer may need those closing costs paid to make the deal happen.
- What else are they asking you to pay for? It’s customary for the seller to pay for title insurance and home warranties are common. Surveys, appraisals, inspections, etc… are typically on the buyers dime. Make sure you review those sections (AND ADDITIONAL PROVISIONS anything goes there).
- What do they want included? Washer dryer? Fridge? Curtains, hot tub, pool table, patio set?? You never know what they will write in there so be sure to review that and that you are ok with those items.
- How much time are they asking for to inspect etc? They shouldn’t need more than 10-14 days. If they want longer, it is potential for you to be off the market for a long time and then have them terminate without penalty. Reign those dates in!
- Document delivery: You are required to give them pertinent documents regarding the property including: HOA docs, budgets, meeting minutes, building permits, surveys, past inspection reports, etc… Be sure to give yourself 7-10 days to pull that info together. Some HOA’s are slow moving or you may need to dig stuff out of storage.
- How long do they have for loan conditions objection? This is a dangerous date and usually the buyers agent pushes out that date to right before closing. Just know that if you leave that date as the day before closing and they walk FOR ANY REASON (under the guise of not being happy with their loan), there is nothing you can do AND they get their earnest money back. My advice is a week before closing (minimum) and don’t move until that date is past.
- Closing date/possession date: Can you meet those dates? Be sure you have moving companies that have given you quotes so you can call and arrange dates to be sure to meet that deadline. If you don’t hand over the house in time you are subject to penalties.
As you can see, there is a lot to consider and there are plenty of pitfalls involved with contracts. If your Realtor sends you the contract and doesn’t offer to go over it with you, insist they do (unless you are an attorney or VERY familiar with legal contracts). The contract is OBLIGATING YOU to perform with penalties of lawsuits and forced sale if you don’t comply…so don’t take contract review lightly. REMEMBER: It is your butt on the line with this contract. Not your Realtors.