In any negotiation each side has certain leverage which enhances its ability to negotiate favorable terms; however, once an agreement of sale is fully executed, terms are set, and most leverage disappears.
As the title of this article suggests, if you elect to have an agreement of sale reviewed, which you should, get it into the hands of your attorney before you sign it. Neither the seller nor the broker may encourage you to do this for obvious reasons: they are eager to seal the transaction. Most home sales are documented by printed forms which are usually prepared for and favor the seller. The thought is often that attorneys merely interfere with the process of getting an agreement of sale signed. Not so. An attorney’s function is to make certain that the parties are dealing on a “level playing field” from the outset.
Remember, for many people the purchase or sale of their residence is the most important legal transaction they will ever be involved in, and there are a multitude of issues which should be addressed before you bind yourself legally. Some are financial; others deal with title to the property; condition of the structure, the land and the accessories or contents; sewer, water, and utility service to the property; and tax matters.
- Here is a brief list of some of the more important economic issues which should be considered before an agreement of sale is signed:
- Size of deposit/down money.
- Who holds the deposit?
- Is the deposit interest bearing and insured?
- Can the purchase price be negotiated?
- Is the seller providing any credit toward closing costs?
- Is your entire deposit at risk if you default?
- Can your deposit be made in multiple stages with the largest portion of the deposit given only after the property passes inspection?
- How are transfer taxes being shared?
- What is the adjustment of real estate taxes? Other than economic issues some other issues to be considered are:
- Do you need title insurance?
- Who selects the title insurance company?
- What title exceptions are acceptable and which deserve close scrutiny?
- Is a survey necessary?
- Is the property in a flood plain?
- What will your mortgage lender require of your title policy?
- Is the agreement clear as to whom is paying the broker?
- Your agreement should include a comprehensive home inspection clause, covering structure, mechanical systems and fixtures, water penetration, roof, hardware, plumbing, heating, and cooling.
- A separate termite and wood-destroying insect inspection should be included.
- If the property is served by on-site water or sewer/septic systems, separate inspections of these should be included as part of the agreement of sale.
- Always insist upon the right to perform a radon inspection. Each of the inspection clauses should allow you to terminate the agreement if the inspections are not satisfactory; at a minimum, the seller should be required to repair existing damage to the satisfaction of your inspectors before you are required to settle on the purchase of the property.
It should now be clear that careful review of your agreement of sale is necessary before you put pen to paper. We find that the vast majority of real estate brokers are ethical and only trying to do their jobs. Universally, however, the broker is representing the seller – not the buyer – and that is where his or her allegiance is. Since the broker has often prepared the agreement, he or she may resist substantial modifications. This is where intervention of an experienced real estate attorney can be beneficial. Most of the issues described above are not “deal-breakers” by any stretch. However, if not properly addressed before signing, the unwary or unsuspecting buyer may be in for a rude awakening. Proper planning will ensure that your next agreement is fair to both sides before you sign.