What are Real Estate Contract "Terms"?

Home Sellers don’t always choose the highest money offer they receive.  Their decision on which offer to accept comes down to money and terms.  But what do we mean when we say “terms” and what categories of terms can influence a seller’s decision on which offer to take?

Dates.  Sometimes the seller wants to close quickly, sometimes they want to close months down the road.  Sometimes they need to close on a certain date to avoid tax consequences or get the money they need to keep another commitment.  Find out and do what you can to work with them.

Home and Radon Inspections.  Sellers would rather not have uncertainty and the likely costs that come with a home inspection.  Buyers take a risk if they don’t do one.  Count the potential costs and evaluate how big of a risk you are willing to take.

Loan Type.  Most loans fall into 3 broad categories:  Conventional, FHA, and VA.  Most sellers prefer Conventional loans.  FHA and VA loans both come with additional inspections tied to the loan.  

Appraisal.  Doing an appraisal is a protection for buyers and a price risk to sellers. I did a deep dive on the issue.

Down Payment. A bigger down payment shows a more stable financial situation for the buyer.  Sellers prefer buyers like this because they are more likely to close on the house if there are any issues along the way.

Earnest Money.  Earnest Money is money a buyer puts up when the contract is signed.  It can be lost if they buyer defaults on the contract.  More about this.

Rent Back.  Giving a seller time to rent the house after closing is often beneficial to the seller.  A seller can get their money from a house and not have to move out right away.  This especially helps if they are buying another house with the proceeds from the sale.  You could charge for this time; traditionally buyers charged sellers their new carrying costs for the house.  In this recent hot market rent backs are often given for free to entice a seller towards an offer.

We help people navigate these issues on each particular offer, but having an idea of what you are willing to do and what you are not willing to do as you go into the process is helpful.  As always, feel free to contact us with any questions about your particular situation.

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