Last year, multiple offers were common. Consequently, it took no time at all to negotiate a sale. In most cases, buyers had only one shot at getting the price right. The winning contracts were negotiated quickly with little, if any, bickering over price and terms. If you missed the mark, you rationalized that it wasn’t meant to be and searched for another opportunity.
Multiple offers have declined. Instead, multiple counteroffers are becoming the norm. Negotiation is back in vogue. Buyers are on more equal footing with sellers than they’ve been for years.
Some of today’s home-sale transactions require several rounds of counteroffers to reach a mutually agreeable purchase contract. Also, there’s no guarantee that if you start negotiating that a deal will be made. Buyers are more willing to walk away from the bargaining table than they were a year ago.
When multiple offers were common, negotiations were usually done when the contract was ratified. A ratified contract is one where both buyer and seller accept, in writing, all the terms and conditions. It was common for buyers to lift contingencies without asking the seller to pay to cure any defects. In many cases, buyers simply skipped inspections altogether. This sometimes resulted in unfortunate consequences.
Not only is there more negotiation to put a home sale transaction together, the negotiating doesn’t necessary stop when the contract is ratified. A positive consequence of a more normal market is that buyers are returning to saner home-buying practices. Most home buyers are including an inspection contingency in their purchase contracts. And, they’re more likely to follow through with further inspections recommended by the general home inspector. This is good news for both buyers and sellers.
Last year, sellers relished the thought of selling contingency-free for a generous price. However, the incidence of after-closing claims made against sellers for property defects was higher than it would have been if buyers had insisted on doing their own due-diligence investigations as a part of the sale agreement.
Even when buyers were given the chance to inspect, they often weren’t given enough time to complete recommended further inspections. With a back-up buyer waiting in the wings, buyers were reluctant to ask for more time for fear of losing the home to another buyer. Some who sold in last year’s market are still negotiating claims for defects that buyers discovered after closing.
HOUSE HUNTING TIP: Although the negotiation process may seem tedious, it can result in a more solid transaction with fewer after-sale problems. Although sellers usually want the inspection process to be shorter rather than longer, there’s a modicum of protection to be gained by allowing the buyer sufficient time to investigate any property issues–before they remove the inspection contingency from the contract.
Keep in mind that real estate customs, law and practice vary from one area to the next. If you have any questions about how to resolve a negotiation, consult with your real estate agent or attorney.
Some buyers take advantage of a seller’s willingness to grant time for inspections. It’s reasonable to grant a buyer an extension to complete a further inspection if it’s impossible to get the inspection done within the contingency time frame. However, repeated requests for extensions of contingency deadlines can indicate that the buyers either aren’t committed to the sale or they are unable to close.
THE CLOSING: Make sure that your purchase contract includes a provision that gives you the right to issue a notice to other party to perform if a contingency deadline lapses. A real estate attorney can draft such a clause if it’s not already included in the purchase contract.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers,” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.
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