As I`ve noted before, the offer to purchase and the purchase and sale agreement are legal documents. They should be written carefully, scrutinized closely and drafted or at least reviewed by an attorney before you sign them. The offer is usually shorter than the P&S, but it contains some of the same information. For example, make sure that the two key contingencies
(inspection and financing) are specified in the offer as well as in the P& S. If they are not mentioned in the initial agreement, you may not be able to insist that they be included in the final purchase contract.
At a minimum, the offer should contain the following:
1. A complete property description. This means not just the address, but a precise description that includes the amount of land, the boundaries, the place where the owner`s deed is recorded and so on.
2. The amount of any deposit or binder accompanying the offer. This should be no more than $500 or $1,000, or whatever is common in your area.
3. What`s included or not included in the sale. For instance, the refrigerator is part of the deal, but the dining-room chandelier isn`t.
4. Any additional contingencies.
The offer should also indicate what happens in the event of a default by either party. (For example, if the seller changes his mind and refuses to go through with the transaction, or if the buyer reneges for reasons other than those covered in the contingency clauses.)
Time constraints
Additionally, the offer should specify the date and time by which the offer must be accepted or rejected by the seller. As a general rule, the less time allowed for a response, the better. Three days is usually about right. That`s long enough for you to have to spend agonizing over whether you`re going to get the house or not. Moreover, you want to minimize the seller`s ability to use your offer as a bargaining tool to encourage another interested buyer to increase his or her offer.
Your offer should also establish a date by which the purchase and sale agreement must be executed. This time should be relatively short, but it should take into account the fact that the agreement will have to be negotiated between the buyer and the seller and their respective attorneys (if the parties are represented by counsel), and sometimes the broker as well. Allow enough time for some unpressured give-and-take, and enough time for the attorney-or attorneys-to do the final drafting after an agreement has been reached.
Again, there`s no rule of thumb for the timing here, but the attorneys I know say they like to see two weeks between the signing of the offer and the deadline for executing the P&S. This is usually more than enough time to produce the final agreement.
A mutual decision
Many offers contain language requiring the buyer to sign a ”standard form” purchase and sale agreement. Don`t even consider accepting that language unless you read that standard form contract first and find its terms acceptable as they stand. Since that usually won`t be the case, you`ll be better off with language requiring you to sign a P&S that`s ”mutually agreed to” by both parties. That makes it clear if you don`t like terms of the P&S, you`re not obligated to sign it.
The date for delivery of the deed-that is, for the final closing-should also be specified in the offer. This should allow enough time after the signing of the purchase and sale agreement for you to obtain financing and for the lender`s attorney (or the escrow or title company) to perform the title search and complete preparations for closing. You should check with your attorney to see what kind of time period is reasonable given market conditions and industry practice in your area.
Standard-form agreements often specify where the loan closing is to occur. In some jurisdictions, that`s usually the office of the lender`s attorney. In others, the closing occurs at the office of the escrow company or at the registry of deeds. To avoid problems, the attorneys I know insert language permitting reasonable changes in the time and location of the closing. Avoid a situation in which the closing location specified by the standard P&S is neither convenient nor practical.
The P&S agreement
If you take my advice and retain a attorney, the particulars of the transaction will be almost completely worked out before you get to the P&S. In fact, as I noted before, a draft P&S agreement is often used instead of the preliminary offer. If the seller accepts the draft, the contract is completed. Alternatively, as with the offer, the seller can make a counteroffer by changing some of the provisions of the draft P&S agreement and sending it back to the buyer for approval.
Bypassing the offer stage can have many advantages. It can save time, because the buyer and seller move more quickly to the signing of the detailed P&S agreement. Working out those details in the initial stages will also make it clear early on if there are disagreements between the seller and the buyer serious enough to break the deal.
Brokers and sellers sometimes object to going directly to the P&S, however, primarily because they`re concerned about something known as
”buyer`s remorse.” This is a common and almost inevitable reaction on the part of buyers who look up, realize that they`ve just taken on the largest financial obligation of their lives, and say, ”What have we done? How are we ever going to pay for this? Is this house really worth the fortune we`ve agreed to pay for it?”
Such thoughts generally come in the middle of the night, and most buyers recognize them for what they are-namely, signs of panic. From the perspective of the seller and the broker, though, the little bit of extra time that`s required to draft the P&S (rather than just signing the simpler preliminary-offer form first) may give the buyer too much time to get nervous.
A similar ailment
While buyer`s remorse is more common, ”seller`s remorse” can also be a factor, particularly in a hot real-estate market. Sometimes sellers have second thoughts about whether they really want to sell a home in which they have been happy for a long time. Sometimes their concerns are more practical- they discover that the house they`re buying won`t be ready on time, for instance, or they get a better offer from another buyer.
You want the P&S to be detailed and complete, but you don`t want the negotiations to drag on for so long that the deal goes flat. If you`ve thought seriously about buying a home and researched your purchase carefully, then any feelings of remorse will be fleeting. And it`s in your best interest to be sure the seller doesn`t have a chance to think twice about the transaction.
The remorse you really want to avoid is the remorse that comes from discovering that the seller has just sold the house you wanted to someone else for $15,000 more than he or she had agreed to accept from you. –
