Well, we’ve found the right house (or close to it…sometimes compromises have to be made) and are ready to make the offer. This is often the most anxiety provoking step in the process; however, it needn’t be because we’ve done our homework.
The first thing we do is to check the comparable home sales in the neighborhood to see if the house is priced fairly and to see how it compares to other similar properties that have sold. This CMA (comparable market analysis) tells us the price range of properties sold in the area and what the average time on the market for them has been.
In many cases, there will not be enough comparable properties that have sold. I will find out the length of time this property has been on the market, if there have been any price reductions, if it’s a foreclosure or a short sale, and what the sellers’ motivation is.
Unlike other areas of the country where subdivisions and masterplanned communities are prominent, many neighborhoods in Rhode Island are an eclectic mix of various types of housing. Homes in a particular neighborhood may vary in size, style, garage or no garage, driveway or no driveway, lot size, etc. This can make appraising a property difficult.
When we are comfortable with what we are offering, we begin to fill in the blanks on the Rhode Island Association of REALTORS®–standard form Purchase and Sales Agreement. This form was developed by the attorneys on staff for the Rhode Island Association of REALTORS® and is revised from time to time as new laws are developed, i.e. lead based paint, and requirement of carbon monoxide detectors installed for a sale. This form is designed to be as fair as possible to both buyer and seller.
The first section of the contract identifies the parties involved (buyer and seller) followed by the property description. The next section is the offer price (purchase price once agreed upon by both parties) and the earnest money deposit. The earnest money deposit is held by the Listing Company until the closing and then becomes part of the down payment. The amount of the deposit is negotiable, however; it is customary in Rhode Island to make a deposit of $1000 with your offer and then increase that to 5% of the purchase price once the Purchase and Sale Agreement is signed by both parties. Again, this amount is negotiable and is determined by whatever is agreeable to both buyer and seller.
Next is the mortgage contingency clause. If you are seeking a mortgage, then you want your earnest money deposit to be protected in the event your mortgage is not approved. This section outlines the amount of a mortgage you’ll seek and the pertinent dates that must be met by you and your mortgage company. Since this is such an integral part of the purchase, I strongly recommend using a lender you or I have worked with in the past. I only recommend lenders I trust not to put your deposit in jeopardy.
Next is the fixtures section. Typically, anything affixed (requiring a screwdriver to remove) to the house remains with the house, i.e. doors, screens, blinds, storm doors and windows, electric and other lighting fixtures, outdoor television antennas, and shutters. In addition, garage door openers and controls, flagpoles, fences, gates, trees, shrubs, and plants in the yard convey with the property. Garbage disposals and dishwashers also convey. Refrigerators, ranges/stoves, and built in microwaves often convey, but not always and should be specified in the contract if you wish them to stay. Washers and dryers sometimes convey and again should be specified in the contract if you want them.
Next is the title section which explains the type of deed being transferred to the buyer and the buyer’s right to conduct a title search to determine any defects in the title. If seeking a mortgage, a lender requires a title search. In Rhode Island, this title search is conducted by the closing attorney or by a company the closing attorney contracts with. This step in the process is often done behind the scenes, unbeknownst to the buyer unless of course a defect is determined.
The next section deals with taxes and other adjustments made at the closing. The taxes will be pro-rated with the responsible for unpaid taxes up to the date of closing and the buyer, the date of the closing and beyond. If a seller has paid for taxes beyond the closing date, the buyer will reimburse the seller for the days or months paid. Fuel in an oil tank and water bills are examples of other adjustments made at the closing.
The next section addresses the disclosures and your acknowledgement that you received such disclosures and information. Rhode Island requires that sellers provide buyers with a Rhode Island Real Estate Sales Disclosure Form prepared by the seller and a Seller’s Lead Disclosure.
There are provisions for a Home Inspection. Typically, the buyer has 10 days to conduct a home inspection, negotiate any repairs and/or concessions and decide to proceed with the purchase. Typical inspections include a physical/mechanical inspection, a radon test, a septic test (if house has a private septic system), a well test (if well water) and a lead test.
Finally, agency is acknowledged and that I am your Designated Client Representative.
This is a synopsis of the contract. The legalese contained brings this contract to 5 pages! Luckily, it is plain language and easily understood.
Now, as your Designated Client Representative, I present the offer to the Seller’s Representative who in turn presents it to the seller. There may be multiple offers, there may be multiple counteroffers. A fair offer usually generates a fair response. There will be no stone left unturned to get you the best possible outcome!