This is a continuation from What You Need to Know–the Regional Sales Contract for Northern Virginia Real Estate.
My understanding is that the sales contract used to comprise all of 2 pages; now the contract is usually 23+ pages. Got to love it!
6. Paragraph 10B covers the appraisal contingency in the contract. A few years ago this was often crossed out to make contracts more appealing to Sellers when competing against 3-18 other contracts. Yes I came across 18 offers once back in 2004. It was nutz!
These days contracts are just about always contingent on the appraisals. I’ve had about 4 appraisals come back low this year creating a bit of drama in the process. Often appraisals are not accurate and a 2nd appraisal gives a bigger picture. You see appraisers are not on the front line of real estate. They are behind the front line of very productive agents working in niche areas who know the markets better than anybody. It seems like often the bogus appraisals are associated with lenders outside of the area.
A low appraisal can be an opportunity also to negotiate a lower sales price, but when the appraisal is a farce it can only prevent 2 people who want to do business from just that–closing a deal. One example was a BR+den in clarendon that appraised for $400,000. Both the listing agent and myself cried bullcrap.
The main thing to know about this paragraph is that it can be used in an aggressively strategic manner in some situations. For example, you really like the home, but aren’t quite sure if you want to move forward or not. Or perhpas you do want it but need the approval from a 2nd party such as your fiance. However it is super clean and charming and priced right or low and I tell you it is likely to go under contract this 1st week based on my having my pulse on the market. So 1 option to cover yourself is to submit a contract, negotiate and get the home under contract and ratified while we have a 3-5 day window following of a financing contingency–an “out” to the contract essentially while you make up your mind on the home. Of course there are other outs in the contract as well, but the main point is that sometimes it is the aggressive route to get a home off the market and under contract even if you have not completely decided yet if you really want it or not. Often real estate is time sensitive and I consult my clients to play to win from many angles with the advice I give. It’s about preserving your interests and choices.
8. Paragraph 16 on the termite inspection. Most lenders require a termite inspection for their self interest as they do not want to use their money to secure a home about to fall apart with extreme termite damage. I always recommend we get our own termite inspection as the cost is negligible and we can trust our report more than the Seller’s.
We cross out the line that prevents the damages a Seller can pursue against the Buyer from being more than the EMD–earnest money deposit. In other words we try to limit damages by seller towards you if you default to the earnest money deposit in a worst case scenario instead of leaving you open to further damages. Now I’m the only agent I know of that crosses out this line in Northern Virginia but like I said my team at JustNewListings.com is very aggressive in protecting you financially.
The reality of the default clause has to do with AMD–assured mutual destruction. Let’s say you are not able to close on time–do you think the Seller really wants to relist the home and start over because you can’t close for several days and are technically in default. Probably not….They’ll be upset and annoyed and perturbed and they will live and sell their home to you a few days later. AMD is a great thing in that it serves in keeping contracts together even when people are upset with each other….
“Days” are counted by the 1st day following delivery and the time period ends at 9pm on day specified. This is important for computing various contingency periods and when items/signatures/initials are due. Keep in mind when something is late for whatever reason…AMD usually rules the day. This goes back to what I said in the 1st part of this subject–there is a difference between the paper world of real estate (sales contract) and the real world of real estatate (people, necessity, etc.).
In addition ratification is the day all terms are agreed to in writing–not the expiration or removal of the contingencies.
12. In the Virginia Jurisdictional Addendum which is mandatory on all contracts there is an out for homes or condos that are in associations giving the Purchaser 3 days after receiving the condo docs or association docs to void the contract.
This out in the contract can be used for getting the home off the market while you finish deciding on whether you really want to move forward or not with it. Was it intended for this purpose? I assume not, but that is its practical application and if that doesn’t sit well with NVAR they should come up with a better form. Until then my buyers & I will use the form as we see fit in the process of purchasing a home, and I will aggressively represent & negotiate for buyers using every possible angle for our advantage.
13. Home Inspection Addendum In this addendum I like to add a clause, “‘Days’ in Paragraph 1 (i) above shall be defined as business days.” This is much more practical in terms of meeting deadlines. The main item to observe is section ii where the buyer can just void the contract after inspecting the home. In Section i the Purchaser and Seller negotiate any inspection items taking into account that in addition all systems and appliances per paragraph 7 of the contract are supposed to already be in working condition.
I could go on and Lord knows there are a lot more forms but these are the issues that usually Buyers and Sellers end up focusing upon. If you have any questions on the sales contract let me know and if it is appropriate-something not clear cut–I will refer you to a real estate attorney instead which I am not.