Massachusetts South Shore Real Estate Blog: Repair Negotiations 101 for Buyers

Nothing causes more hassle in the purchasing process than negotiating repairs after a Buyer’s home inspection. The scene is recurring: Buyers see their dream home at an open house, they spend twenty minutes walking around among their fierce competition, and then make a strong offer as quickly as they can. After a few rounds, their offer is accepted; then reality sets in. Their home inspector finds a myriad of latent defects which leave the Buyers reeling. What is a Buyer to do? This week, we’re going to tackle the psychology and logistics of negotiating repairs when buying a home.

Position your Request Strategically:  Remember that this is a negotiation, not a Seller obligation. It may be the case that the Buyer “wants” certain repairs completed, but the Seller needs to understand why. First, be sure to explain that the defects were latent or not easily noticed as they were certainly factored into the Seller’s pricing strategy. The apparent defects, peeling paint, outdated kitchen, and cracked tiles should have been factored into your initial offer. It is much more compelling to explain to the Seller why you could not have seen the defect that is causing you to revise your offer. Second, as soon as possible, send a proposal that is concise, professional, and understandable. Rambling emails, with misspellings and exaggeration, do nothing but anger the Seller. Third, be realistic. Some Sellers are incapable, for physical, logistical, or financial reasons, of making repairs. There is a difference between asking for more than you expect and overreaching. Fourth, the repair items may have been disclosed and factored into the price. Avoid the impression that you’re “double dipping.” Fifth, no house is perfect. Demanding the Seller deliver a perfect house is unrealistic. Finally, negotiations will often boil down to a simple question of whether you want to fight for sport or get the deal done.

Include the Repairs in the Purchase and Sale Agreement:  You may be advised to keep the repairs from the bank since “it might complicate things.” Our advice is to be fully transparent with your lender. While it may be aggravating to pay for a re-inspection by the appraiser, it is far better than allegations of mortgage fraud or violating consumer protection laws. Keep everything above board and disclosed.

Don’t Ask for Repairs:  You read that correctly. Sellers have a lot to do and most do not have the time and some do not have the money to make extensive repairs prior to closing. By getting, thorough, written, reasonable quotes from licensed service providers and proposing the Seller cover some or all of that expense by reducing the price or providing a credit, it gives the Seller the most flexibility with little effort. A credit, with the lender’s approval, is an appealing option as it will generally leave the Buyer with additional funds to complete the repair after closing or to compensate the Buyer for the effect that a repair item has on property value. One quick pointer: Sellers will often foresee your concern with a particular issue and gather quotes in anticipation of negotiation. As a Buyer, you may want to ask the service provider to state, in writing, that they will honor the quote for some period of time. It is unpleasant for Buyers when the cost of a repair balloons after a service provider refuses to honor their previous quote.

By following these tips, you maximize your chances of having the Seller agree to your proposed repairs or concession. Many deals fall apart during this stage of negotiation. By approaching with strategy, diligence, and integrity, a Buyer will be best positioned to have their proposal accepted.

Click here to get to know our team.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2016 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog, further Bob Bonkley was compensated for his likenesses and appearances in the same.

South Shore Real Estate Blog: The Great Thaw—Five Ways to Loosen Inventory

South Shore Real Estate Blog: The Great Thaw—Five Ways to Loosen Inventory

Bob ThawAnyone involved with today’s market undoubtedly knows that we are in a period of low inventory. This week, we’re going to look at five strategies that allow Buyers and Agents to help thaw an otherwise frozen market.

  1. One Day Exclusive Listing Agreements:

Ordinarily, a Buyer’s Agent will search the MLS looking for homes that meet their Buyer’s requirements within a given area. Due to low inventory, very often there are few homes, if any, to show a Buyer. In this situation, an Agent should consider what’s known as a “one day exclusive listing agreement.” Very simply, the Agent will send a letter stating that they are an Agent of a Buyer who is interested in their home. The Agent will represent/list the recipient’s home for a single day to allow their Buyer to view and potentially submit an offer and as an additional benefit to the Agent, even if the Buyer does not make an offer, for whatever reason, the Seller will often ask the Agent to list their home for sale because now their mindset has shifted due to the excitement of moving. Result: the Buyer is able to see more houses, the Seller is spurred to list their house, and the Agent either sells a house or gets a listing: this is  truly a win, win, win situation.

2. Technology/Social Media: 

One may take the “old school” approach of actually knocking on doors and asking if the owner is interested in selling; and it may work. With social media as a platform to broadcast a desire or need, it’s easy for an Agent to post what their client is looking for, perhaps enticing an otherwise non-selling homeowner to sell their home. For example: “I have a Buyer looking for a 3 bedroom home with a yard big enough for their dog in Mytown, USA.” As an additional benefit, you are marketing and developing your brand as a Real Estate Agent. Friends who didn’t know you were an Agent will be reminded by such posts. Use technology and creativity to “manufacture” inventory and develop your brand.

3. Negotiate a Home Sale Contingency:

Many Buyers are sitting on the sidelines waiting for inventory to increase. The problem is that many of these Buyers are also would-be Sellers. To increase inventory, Buyers who also need to sell should make an offer which includes a home sale contingency with their offer. That said, not all home sale contingencies are created equal. There are generally four types which expire at different points of the sale process: 1) the Seller becoming party to a signed offer, 2) the Seller becoming a party to a signed purchase and sale agreement, 3) the Seller’s Buyer receiving their mortgage commitment, or 4) the Seller closing on their sale and receiving proceeds. An Agent guiding their Buyer should define precisely which type of home sale contingency they are seeking. Sellers should bear in mind that while inventory is low, there’s a good chance that the Buyer will sell their own home quickly assuming their home is properly marketed at a realistic price. The Seller’s agent may be able to evaluate the Buyer’s marketing strategy and home to get a better sense of how likely it will be to sell at the Buyer’s listing price.

Notwithstanding, Sellers may also choose to include a “Kickout Clause” in their counter offer. Generally speaking, a kickout clause allows the Seller to continue listing their house for sale, during which time if the Seller receives a bona fide offer that is stronger than the Buyer’s offer, the Buyer is given a defined period to either waive the home sale contingency or exercise their rights under the contingency to terminate the Agreement. For more information on kickout clauses, read our article, The Offer Part 2 – Contingencies for Sellers to Consider.

4. Negotiate a Suitable Housing Contingency:

Many Sellers are saying that “If I found the right house, I would sell mine.” Those Sellers are sitting on the sidelines waiting for inventory to increase so that they can find their next house. (Some homeowners simply prefer to Sell before they buy. Buying before selling comes with the risk of not being able to find a home to purchase before having to close on their sale.) As with sale contingencies, not all suitable housing contingencies are created equal. A suitable housing contingency generally expires at one of four points: when the Seller 1) signs an offer, 2) signs a purchase and sale agreement, 3) receives a mortgage commitment, or 4) closes on their purchase. The benefit of sharing the risk is that Buyers who would otherwise wait for inventory to increase before listing will be willing to list and sell their homes, thus, increasing inventory.

5. Disclose the Seller’s Time Requirements:

Finally, a Seller may choose to disclose on the listing that they need more time than is customary between signing the Purchase and Sale Agreement and closing: sixty days or even longer is not unreasonable when properly disclosed. Many Buyers are flexible and wouldn’t mind extra time if it means buying the home of their dreams.

While the above strategies do not present a complete panacea, using one day exclusive listings and strategic contingencies can help to bring homes that would otherwise stay off the market, into the market. The common thread between these five strategies is creativity. Creative thinking can help to thaw the frozen market, benefiting Buyer, Sellers and even Agents, alike.

Click here to get to know our team.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2016 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog, further Bob Bonkley was compensated for his likenesses and appearances in the same.

The Massachusetts South Shore Real Estate Blog: 10 Tips to Survive a Sale and Purchase of Real Estate on the Same Day

The Massachusetts South Shore Real Estate Blog: 10 Tips to Survive a Sale and Purchase of Real Estate on the Same Day

Bob Bonkley introduces Molly Moraine to the exciting world of Real Estate blog fame.

There are few things more daunting to a potential Seller/Buyer than attempting to close on a sale and purchase on the same day—also known as “back to back closings.” While most transactions will be completed without a hitch, here are 10 Tips that every Seller/Buyer should consider when attempting a back to back closing:

  1. Use one Real Estate Professional Team: whether an attorney or a broker, make sure to use a single professional to be your point of contact, either should be familiar with your mortgage professional.  All of this helps to limit errors due to miscommunication.
  2. Make Sure the Dates Align: this one seems simple, but you’d be surprised—be sure the Offer (and eventually P&S) sets the closing dates of the sale and purchase as the same day. Make sure the financing contingency dates align properly–the contingency date for the Buyer of your sale should occur before the contingency date for your own purchase.
  3. Use the Right Contingency: when drafting an offer, make sure to insert a very particular contingency which makes your performance as a Buyer “contingent upon receipt of the proceeds from the sale of the Buyer’s home located at 123 Main Street, Anywhere, Massachusetts.” This is different from a sale contingency, as conceivably you, as Buyer, could have sold but not yet received good funds to bring to the next closing, or worse yet, the Purchase and Sale Agreement has been signed but your sale subsequently falls through.
  4. Utilize a Power of Attorney: it is very common for a Real Estate attorney to attend and sign on behalf of a Seller at closing. The Seller does not need to attend.  This frees up the Seller to focus on other things such as coordinating with movers, going to the bank or making last minute adjustments with the closing attorney for their purchase.
  5. Understand that you have to be “On Record” before Moving In: some are surprised to learn that signing the paperwork and tendering the cash to the Seller are not enough to get the keys to your new home; rather, the Buyer will be the true owner and given access only after the deed is recorded with the applicable County Registry of Deeds.
  6. Understand the Realities of Funding: the lender will wire the loan proceeds to the closing attorney. This wire can take time to arrive; therefore, early morning closings are unlikely to record and fund until midday. Keep in mind that the first transaction must fund and record before funds can be wired to the closing attorney for the second transaction–it would make sense to leave ample time between the two closings.
  7. Notify other Parties in the Chain of Transactions: in most cases, when closing attorneys are part of a chain of closings they work together to coordinate the closing schedule, and thus the transactions go very smoothly. If you wait until the week prior to closing to mention this to your closing attorneys, you may have unnecessary and otherwise avoidable scheduling problems.
  8. Try not to Schedule for the End of the Month: many Buyers prefer to close at the end of the month, most famously to avoid paying prepaid interest—a false economy worth debunking in a future article perhaps. Scheduling a closing in the first two weeks of the month: 1) usually results in greater attention by lenders and attorneys, 2) means shorter lines at the recording desk, and therefore, faster transactions, and 3) more flexible schedules for all involved Real Estate Professionals.
  9. Consider Inserting a Use and Occupancy Agreement in the Offer: a Use and Occupancy Agreement (called a “U/O” or “U and O” by people in the know), permits a Buyer access to a property for a period prior to closing or alternatively allows a Seller to remain on the property for a period after closing. This can relieve some of the scheduling conflicts that are inherent with a back to back closing.
  10. Roll with the Punches: remaining flexible helps to facilitate the transactions with the least amount of stress possible.  Sometimes creative solutions are necessary. There is no doubt that back to back closings can can be hectic and stressful, but it’s easy to forget that for all your troubles you’re getting a brand new home!

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2014 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog, further Bob Bonkley and Molly Moraine were compensated for their likenesses and appearances in the same.

 

The Massachusetts South Shore Real Estate Blog: When to Retain a Real Estate Attorney

The Massachusetts South Shore Real Estate Blog: When to Retain a Real Estate Attorney

When to Retain a Real Estate AttorneyThe purchase or sale of Real Estate results in various costs. Among these is the cost of retaining an attorney. Some Buyers and Sellers elect to wait to hire an attorney until the Buyer’s home inspection is finished. The logic is understandable: why should I involve another party, potentially incur additional costs, for a transaction that may not happen? This week, we’ve decided to throw in our two cents and explain why retaining an attorney earlier in the process is cost neutral and can result in other important benefits.

In an ideal world, every Buyer and Seller would have their real estate attorney’s number saved in their cell phone as their number one contact. Before a Buyer submits an Offer, or a Seller accepts an Offer, an experienced real estate attorney can provide legal advice as to the consequence of, or the lack of, contingencies.

Since we don’t live in an ideal world, and real estate agents generally do a nice job advising their clients at this stage, we’re going to assume that the Offer has been submitted and accepted before either the Buyer or Seller calls the attorney–all of that said, we recommend reading a couple of our earlier posts: The Offer Part 1–Five Contingencies for Buyers to Consider and The Offer Part 2–Contingencies for Sellers to Consider.

When Sellers Should Retain an Attorney: Sellers should call a Real Estate Attorney prior to or as soon as they have accepted an Offer. After the initial consultation and quote, the Seller should ask their attorney to draft the P&S. The attorney-drafted P&S will generally include additional provisions that provide further protection for Sellers that are not included in the standard form P&S drafted by a Broker. Further, it allows the attorney to remove the administrative burden from the Broker acting as the “go between” for the respective attorneys. This allows the Broker to focus on other important tasks. In the event that the transaction falls through before signing the P&S, the Sellers will most likely find another Buyer. At this point, the attorney will simply modify the changed terms to reflect the new deal. Since this will incur very little or no cost, there is little cost-savings to wait to retain an attorney.

When Buyers Should Retain an Attorney: With Buyers, there’s a bit more gray area. A Buyer’s Offer is usually contingent on the home inspection. The Buyer may want to see the results of the inspection before investing any time on further negotiation; however, the same logic described above applies here. Stiles Law, with rare exception, will not invoice Buyers in the unfortunate event that the P&S is not signed and thus the transaction is not consumated. We assume that the Buyer will retain our firm for their soon to be purchase; therefore, retaining an attorney early is cost neutral.

Observations from Our Experience:

  1. Waiting Disadvantages your Negotiating Position: After the deal is set in stone, it’s very difficult for a late-comer to make significant changes.
  2. Waiting can Rush the Lawyer’s Review: The offer sets a deadline for signing the P&S. Hiring an attorney the day before this deadline can result in a rushed review that in some cases results in inadequate protection.
  3. Waiting Causes more Stress: It’s a terrible feeling for both Buyers and Sellers to look at the clock to see if their deal is about to fall apart.
  4. Mother Always said “You get What you Pay for”: If an attorney is willing to review this extremely important legal document for free, you should run away…quickly! You should find an attorney that is willing to represent your interests, not one that is simply willing to “look it over as a courtesy for your lender.” It is important that the attorney is representing your interests, not simply going through the motions in order to obtain the eventual legal engagement from your lender.

While the benefits of retaining a real estate attorney are clear, the optimal point to do this is less clear. Hiring an attorney early in the process is cost neutral, strengthens your negotiating position, allows for thorough review, and reduces everyone’s stress.

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2014 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog and Bob Bonkley was compensated for his likeness and appearance in the same.

 

The Massachusetts South Shore Real Estate Blog: The Offer Part 3 – Negotiations 101

The Massachusetts South Shore Real Estate Blog: The Offer Part 3 – Negotiations 101

Arm Wrestle to Finish Negotiation

In Parts 1 and 2 of our three part series, we focused on the necessary considerations of Buyers and Sellers when approaching the Offer to Purchase. This week, in Part 3 of our three part series, we have come up with seven helpful tips to effectively negotiate the Offer.

  1. Use a Real Estate Professional to Negotiate: We’ve said it before, but we’re going to hammer it home again: using an experienced Real Estate Professional is critical. The reasons are three fold: 1) with rare exception, most of us have not negotiated a deal involving many hundreds of thousands of dollars, 2) the Real Estate Professional can act as the “bad cop” and disguise your deal seeking nature as zealous client representation (thus insulating you from looking like the “Bad Guy,” and 3) the Real Estate Professional knows “when to hold ’em and when to fold ’em.”
  2. Don’t Make Snap Decisions/Don’t Take Too Much Time: It is sometimes the case that a Buyer and/or Seller will make a rash decision. It’s difficult, uncomfortable, and often expensive to unravel a bad decision. Take your time, listen to your gut, do your homework, and talk with your Real Estate Professional before making a decision. By the same token, waiting too long to make a decision can mean the difference between reaching the deal and walking away empty handed. In a hot real estate market, agile, focused parties will succeed more often.
  3. Don’t Take Negotiations Personally: While the negotiation is for a home which is a very personal object, it’s sometimes hard to remember that you are still negotiating the sale or purchase of a thing. Pointing out faults with your home is not meant as an attack–it’s a bargaining tactic. Also keep in mind that the tactics that you use may be taken personally by the other side.
  4. Compromise: Trading terms is a great way for both sides to feel like they are getting something. If the closing date isn’t critical to the Buyers, consider offering a long or flexible date in exchange for a concession that isn’t important to the Sellers–everyone walks away with something. As Stephen Covey so eloquently stated in his 4th Habit, “seek a win-win.”
  5. Remind the Other Party that Neither Party Will be Completely Happy: It’s simply a fact of life that compromise will not always yield a result where each side is left smiling. It’s important to remember that an effective negotiation should end with both sides being equally unhappy.
  6. Put Things in Perspective (What’s $5,000 when the House is Worth $5,000,000): We all know a dollar is a dollar, but when it comes down to the nitty-gritty, that extra $5,000 is unlikely to break the bank, and it may be worth taking the hit to make sure the deal is consumated. Don’t walk away from a good deal due to pride or so-called “principle.”
  7. If all else Fails, Flip a Coin or Offer to Arm Wrestle: If neither side is willing to budge on that last issue (be it money or another term), consider disarming your opponent by offering to resolve the impasse with a game of luck or skill (the possibilities are endless: a footrace, pie-eating contest, game of HORSE, Blackjack, etc). Just beware: you may be challenging a world-renowned arm wrestling champion (trust me–personal experience).

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2014 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog and Bob Bonkley was compensated for his likeness and appearance in the same.

The Massachusetts South Shore Real Estate Blog: The Offer Part 2 — Contingencies for Sellers to Consider

The Massachusetts South Shore Real Estate Blog: The Offer Part 2 — Contingencies for Sellers to Consider

Breaking BreadThe Offer to Purchase is often disregarded as a speed bump on the road to a Purchase and Sale Agreement. In Part 1 of our three part series, we focused on the Buyer’s considerations. This week, in Part 2 of our three part series, we are going to consider the Offer from the perspective of the Seller. Though undoubtedly important, sophisticated Sellers must consider more than simply the offered price.

Two Initial Points to Consider:

  1. The aid of an experienced real estate professional, whether an attorney or an agent, is the best means of protecting your interests. In addition to helping you to understand the terms of an offer, a seasoned professional will also help you to respond appropriately.
  2. Sellers routinely negotiate the terms proposed by a Buyer. This means more than rejecting a proposed purchase price. Careful, exhaustive negotiation at this stage helps to make for smooth negotiation of the P&S.

The Two Most Important Contingencies Sellers Should Consider:

  1. Suitable Housing: So you’ve received an offer on your current house before you’ve found a home to purchase; simply put, this contingency makes the Seller’s obligations under the P&S conditional on the Seller finding a suitable property to purchase or rent. Prudent Sellers may elect to add this contingency to avoid the sticky situation of being forced to sell without a place to live. Without such a clause, inconvenience alone will not excuse the Seller’s non-performance under the contract.
  2. “Kickout Clause”: Many Buyers plan to use the proceeds from the sale of their current home to purchase the Seller’s house. Many of those Buyers will elect to protect their deposits by conditioning the Buyer’s performance on the sale of their current home. Sellers should consider proposing what’s known as a “kickout clause,” whereby the Seller is permitted to continue listing the house for sale. In the event a Seller receives a bona fide offer (that is a real, non-sham offer), the Buyer is given some amount of time, usually 48 or 72 hours–though we prefer a certain number of business days to avoid ugly deadlines like Saturday at midnight–to either waive the home sale contingency or exercise their rights under the contingency to terminate the P&S. In the event the P&S is terminated, the Seller may now sell the property to the new Buyer. This helps minimize the risk of a Seller having their house off the market for a deal that will never be consummated.

Thoughts on Common Contingencies Proposed by Buyers:

  1. Inspection Contingency: Sellers should consider setting some threshold dollar amount to this inspection. Out of fairness, a Buyer likely should not be permitted to “walk away” because of some minor defect with the home. For example, no Seller will be willing to take the home off the market for any amount of time if the Buyer is willing to walk because of a loose toilet flange.  A common, fair amount to set  as triggering the Buyer’s right to terminate under this contingency is $1,000.00.
  2. Appraisal Contingency: This is a popular contingency that protects buyers from a “bad deal”; however, Sellers should consider what will happen if the appraisal comes back low. Prudent Sellers will specify that in the event of a low appraisal, the Buyer agrees to reduce any closing cost credit to bring the purchase price in line with the appraised value. Further, Sellers should consider setting this contingency to expire on the same date as the mortgage contingency.
  3. Flood Zone Contingency: This is currently a “hot” area of real estate practice. Buyers are reluctant to purchase properties that are in federally designated flood zones which would require flood insurance. With horror stories of enormous premiums, Buyers often attempt to condition their performance on the lender’s flood zone determination. Technically speaking, a property can be within a “flood zone” without requiring insurance. An experienced attorney will advise their clients to adjust the language of any proposed contingency to make performance conditional on a flood zone determination that would require purchasing insurance, not simply whether the property is in a “flood zone.”
  4. Mortgage Contingency: For those Buyers without sufficient cash to purchase a home outright, most will apply for a mortgage loan or loans. Buyers often condition their performance under the contract upon obtaining a “clean commitment,” that is a commitment by the lender to lend without any conditions that the Borrower cannot easily satisfy. Sellers should strongly consider the amount that is sought to be financed in comparison to the purchase price. Lenders are more likely to approve a loan where the Buyer is bringing a large proportion of the purchase price in cash. Further, sophisticated Sellers will know the difference between pre-approval, pre-qualification, and pre-underwriting to effectively gauge the likelihood of the Buyer successfully obtaining the desired financing–for a brief discussion of these differences, click the link to read: 5 Tips to Thrive in a Thawing Real Estate Market (Part 2 of 2).

Stiles Law, with offices located in Boston and Marshfield, Massachusetts, is a firm concentrating in real estate conveyancing and mortgage lending services, representing buyers, sellers, borrowers, banks, mortgage companies, investors, builders and developers in all of their real estate and mortgage transactions. Stiles Law serves all areas of eastern Massachusetts–the North Shore, Boston, and Cape Cod, in addition to the entire South Shore, including: Plymouth, Kingston, Duxbury, Hanover, Pembroke, Marshfield, Scituate, Norwell, Cohasset, Hull, Hingham, Weymouth, Braintree, and Quincy.

Copyright © 2014 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts. No child labor laws were breached during the creation of this Blog and Bob Bonkley was compensated for his likeness and appearance in the same.