Real estate contract decisions

Real Estate Contract Decisions - two women drafting an offerThe real estate contract decisions faced by home buyers include the price and terms – and terms are basically “everything else” beyond the price.

Real estate contract decisions – price and terms

Assuming that you are pre-approved for a mortgage and that you are are working with a great Realtor or real estate licensee (those should be your starting point), you’ll have a number of things to address and choices to make involving price and terms.  The next is to find out if there will be multiple offers or not – your agent should call the listing agent to inquire.  That is a game changer so should be done upfront. Here are a few of the basic considerations.

1. FORMS Most listing agents prefer the CAR contract, but some may request that offers be written on PRDS forms. Will you draft your offer on the CAR or PRDS contract?

This is perhaps the first “term” to be considered.  In general, this decision is influenced by geography: the “west valley” communities from Almaden or Los Gatos on the southern end up to Redwood Shores or a bit further north will tend to use the PRDS contract.  Most of San Jose, Santa Clara, Milpitas and so on will usually prefer the CAR contract.

If you have written a couple of offers on one of them and then shift to the other, this can be unsettling. Talk with your agent about this decision.

2. TIME / DEADLINES Some of the most important terms among your real estate contract decisions are the timeframes. Other terms matter, such as having a pre-approval letter and providing all the required documentation, such as the proof of funds.  Contingencies are also hugely important terms. Today most sellers want to see no contingencies. That doesn’t always happen, though.
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Agency Question: “Do I have to buy the house from the Realtor who showed it to me?”

Graphic image of a house for sale and a Realtor who showed or previewed the house (person with briefcase)Awhile back, I got an email from someone who’d seen a Silicon Valley house she liked from a real estate agent whom she didn’t like.  She wondered, “do I have to buy the house with the Realtor who showed it to me?”

The answer, of course, is not always clear. It depends on your relationship with the agent.  It may also depend on why you choose to buy the home with someone else’s assistance, if you did so.

(1) Your relationship with the real estate agent

Did you sign a buyer broker agreement with that Realtor? If so, you may owe a commission to her if you buy the home through someone else.

Did you write an offer on that property with the agent? If so, again you may owe a commission to him if you hire someone else to help you purchase it afterwards.

In many cases, there is a verbal contract that you are working with a Silicon Valley real estate professional exclusively. This does “count” too but it may be easier to change your status if it’s a verbal agreement.

(2) Problem agents, problem consumers.  Do you want or need to break the relationship with the Realtor who showed you this or other homes?

Is your agent giving too pushy? Doesn’t seem to know what he or she is doing?  Too hard to reach?  Too busy to really assist you? Or doing something else that you perceive as a “red flag”?  Sometimes agents should be fired.

You most likely can break that agency relationship with a problem agent if it’s a verbal contract only and you haven’t written an offer on the property in question, but you must  clearly tell him or her that you are not going to continue working together and then have a gap in time between then and when you do write an offer on the home (at least a few days, if not a few weeks).  You can break the agency relationship verbally or in an email or both, but it needs to be clear so that there is no misunderstanding. A call or voice mail followed up by an email would be very clear.

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Being Secretive with Your Realtor? It’s Not a Help.

Recently I’ve had the uncomfortable experience (a couple of times) in which potential clients were overly secretive about their situation. One was in Los Gatos, another in San Jose.

I’m going to be blunt here: it is really hard to help when we, as agents, don’t know what is truly going on. It’s not a whole lot different than keeping important things from your doctor or lawyer. If you want help, it is imperative that you tell your hired professionals what is going on.

For that matter, if you are interviewing agents to list your home or to help you to buy your next home, expect those agents to ask you about your needs and motivation. Hiring an agent (and the agent agreeing to take you on as a client) is a two way relationship. Both sides need to be clear and honest with each other.

Let me give you an example. Years ago, I had some prospects (not yet clients) in Monte Sereno who inquired off and on for years about selling their home. At one point, it became a “hurry up” situation. Luckily, they told me the truth: one of them had been diagnosed as terminally ill. The sick one did not want to saddle the survivor with selling the home after the death.

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