Finally, after all that back and forth negotiating, you have a signed offer by both you and the buyer. Way to go! However, don’t get too excited. There are lots of things that can blow the sale, so let’s teach you how to protect yourself!
Effective Date: Remember that the day the last party signs and/or initials the contract is the effective date and that’s when the clock starts ticking. It’s very important that all parties know the effective date due to the contingencies allowing the buyer to walk away.
Escrow Deposits: Escrow Deposits can be overlooked. If the buyer is paying cash, try to get them to put up 10% of the sales price as a deposit. If they are financing, get as much as you can. Usually 1% and up is acceptable. The more they are putting down with the bank, the more they can put into escrow for you.
Mortgages: One of the biggest contingencies to watch for is if the buyer is getting a mortgage. Usually they will write in anywhere from a 20 to 30 day clause stating that if they can’t get a mortgage commitment from their bank, then they can back out of the deal. The number of days is negotiable and I always opt for fewer days when representing a seller. It forces the buyer to get moving and you can always allow an extension of time once the date hits.
Inspection Period: If the buyer writes the contract on an “as-is” contract, they can back out at anytime during the inspection period at their sole discretion. They can just walk away and there’s no recourse. So make sure you don’t allow too long of a time period. They may want 15 days, but go for 7. That’s enough time to get an inspector out there and get the results back.
Right of Recession: With condos, buyers have a 3 day right of recession on re-sales and 15 days on new construction where they can review the condo docs, by-laws, budget, most recent financials, frequently asked questions, and the governance form. This time period starts from the day they actually receive the documents. So do not delay. Get them all of this paperwork immediately! You don’t want to be one week away from closing and have it fall apart because you never gave the buyer the paperwork they are required by law.
Remember, don’t get too excited until the deal is closed, anything can happen in a real estate transaction. Protect yourself and the sale now and you’ll be thankful you did. Good luck out there!