I. Showing your home
When you take a prospective buyer through your home, be careful. If he asks you about a potential problem, answer the question honestly. If you make any representations to a prospective buyer that are false, you may be held liable under an express warranty legal theory.
If you are selling a fixer-upper house, hold the property out as such, and make sure you inform the buyer that you are selling the house “as-is”.
If you plan to remove any of the fixtures such as chandeliers, or any of the appliances, let the buyer know. These items will be outlined in the contract. While walking the buyer through the house, try to find out as much as possible about the buyer. Do a good, thorough job in finding out why the person wants to buy your house — is he relocating and in need of immediate housing? Is he buying your house as an investment? What is his time frame? Ask all of these questions in a nice way. They may prove invaluable in negotiations.
II. Negotiations and The Offer
An interested buyer may ask you if you’ll accept a certain price for your house. You may not want to talk with the buyer about price and terms until you are satisfied with the buyer’s financial capability to buy your home.
In most cases, to get to the sale processing rolling, the buyer must put an offer in writing to purchase your home, sign it, and give you an earnest money deposit of $1,000. Making a prospective buyer put his intentions in writing helps you to determine if he is serious about buying; he may be trying to find the price you are willing to sell your house for, and then when it comes time to put the contract in writing, he will lower the price. You have a good argument for making the buyer give you the written offer because you can say that you cannot determine the price until you see the terms under which he would like to buy.
If the buyer is really interested and you fell like you can sit down and negotiate the price and terms, then sit down with the buyer and write up a contract together. Be aware that contracts for real estate in the state of Illinois are not enforceable until they are in writing, signed by the buyer and the seller, and contain definite and certain terms (this will be discussed more fully below).
If the buyer gives you an offer, I suggest you have an attorney review it before you sign it. Attorney’s fees are nominal in comparison to the amount of money and complexity of selling your home. An experienced real estate attorney can save you from making any costly mistakes. That being the case, if you want to have real trouble later, go ahead and do it all yourself.
If you are not pleased with the price or the terms of the purchaser’s offer, you can make a counteroffer. Just keep in mind that by doing this, you are rejecting the purchaser’s offer, and that offer will be considered dead. In other words, if you cross out $130,000 on his offer sheet and write in $140,000, at that point you can no longer hold him to his original offer of $130,000. The $130,000 offer is dead and not revived unless and until the buyer reinstates it.
If you agree on the price but not the terms, tell the buyer just that is the case. Try and work out the terms; chances are that if you agree on the price, the buyer will yield on the terms. Inquiries about the offer do not constitute a counteroffer and thus you may still hold the buyer to his offer.
III. The Contract
The real estate contract used to sell your home, must be in writing, signed by both parties, and contain at least:
Your contract should be drafted or reviewed by an experienced real estate attorney. Standard contracts may be quite readily used, but make sure they contain the necessary terms.
The buyer will make the offer in one of many ways:
A.) Cash Offer
A cash offer means that you will receive all cash for your property, not subject to the buyer obtaining a mortgage, or assuming your mortgage, or any other creative financing proposition. This is the strongest and best offer you will receive. A cash offer means that you can hold the buyer to the terms of an executed contract, and that he has does not have the standard mortgage contingency escape the clause.
B.) Mortgage Contingency
This is a standard contingency in most real estate contracts. If the buyer does not receive a standard loan from a bank or a mortgage company, he is not obligated to buy your house. The buyer does not get the mortgage; he must notify you immediately
(sometimes as soon as one day after the time has passed for him to secure the mortgage). Careful prescreening of the applicant may help you determine if the buyer is really able to buy your home. This can be troublesome to the seller, as he must take the property ” off the market” during the time the seller is attempting to secure the loan. I suggest taking all the names and phone numbers of those people who call you once your property is under contract, as many deals do not go through. Then, if necessary, you can call up those people who may still be interested in purchasing your house.
C.) Creative Financing
There are many types of offers made by purchasers:
1. No Money Down — means that the buyer will usually be buying as an investment, and feels he can get more rent per month then he will pay you to buy your property per month. BE CAREFUL HERE — if you need to accept an offer of this type, make sure that you do not convey to the buyer a deed or title to your property. If you do this, your remedies for nonpayment are less and probably more expensive. If you sell your home in this manner, you will want an attorney to draft an agreement for you to sell on a contract for deed basis; once the buyer pays you in full, then you give him the deed/title to your property.
2. VA and FHA Loans — VA loans impose costs on the seller for obtaining the loan, and must be paid by the seller as required by the law. Both of these types of loans may impose additional cost and restrictions on the seller. However, FHA loans are attractive to buyers, but you must make sure that your property qualifies for this type of loan. Call your local mortgage broker to see if a buyer can obtain a FHA loan on your property.
D.) Dates and Time
Make sure all of the necessary dates mentioned above, as well as closing date, are spelled out on the contract. Include the phrase, “Time is of the Essence”, on your contract so you may hold the buyer to perform on the specific dates indicated in the contract.
Real estate taxes, water bills, rents, assessments and other similar charges are adjusted at the time of the closing. The Purchaser pays any charges from the date of closing forward, and the Seller pays all charges incurred up to closing.
IV. The Closing
At the closing, there are many charges that you, the seller will incur, some of which include escrow charges, real estate taxes, providing a title policy, and recording charges. These are all standard, and will be explained to you at the time of closing by your attorney. Make sure all funds you receive are by title company check, bank check or cashiers funds. UNDER NO CIRCUMSTANCES SHOULD YOU RECEIVE ANY PERSONAL CHECKS OR PROMISES AT THE CLOSING TABLE WHEN YOU ARE TURNING OVER TITLE TO YOUR PROPERTY.
I have tried to explain to you, the seller, a brief overview of how you should handle the sale of your home. It would take pages upon pages to explain every possible scenario, but at least make sure you read this paper and understand it. Please call me JUDD M. LOFCHIE, ESQ, at (630) 859-8500, if I can be any help to you.