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In everyone’s haste to secure a property in this competitive housing, market mistakes are being made and I want to point out things to watch for so you are not a victim.
1. Read the contract and addendums BEFORE you submit an offer. It's always best to review these documents before you are in a rush to submit an offer. Doing this in advance will allow you to ask questions and be clear about what you are signing. As a seller, I also recommend you read the purchase contract so you know what your future buyer will be submitting to you when they make an offer on your home.
2. Don’t let your agent write in a bunch of modifications to the contract – there is likely a carefully written legal addendum already available to cover such issues. Often times verbiage will be written in to cover topics such as: waiving the appraisal, non-refundable earnest money, all-cash offers etc… There are prepared addendums created by attorneys that cover these instances so use them as they will keep you out of trouble and avoid misinterpretations.
3. Do NOT waive your inspection, unless you are a contractor and have the ability to fix any and all items. Even at that, you should know what you are buying.
While all of these are important the key point here is that a LOT of issues are developing with verbiage being written into the contract instead of using an addendum. For example – if you want prove to the seller that you are a serious buyer and you say that your earnest money will be non-refundable after the inspection period you now could be setting yourself up for an issue.
The end of the inspection period does not mean the end of the Due Diligence period – so what’s the difference? The due diligence period includes not only the inspection period but also covers when you request repairs of the seller and their response to your request. If you write the offer as I mentioned (nonrefundable after the inspection period) and the seller says they won’t make any repairs so you decide to cancel – guess what you won’t get your earnest money back!
In addition, if you make it nonrefundable after the inspection period you are pulling out the risk of loss provision which protects you if the home is seriously damaged before the close of escrow and eliminating your ability to cancel and get your earnest money back. Furthermore, you would also be eliminating the protection of our earnest money if the seller breaches the contract. Now if the agent utilized the additional clause addendum you and your earnest money would be protected in all of these instances.
If you have additional questions about this or other real estate topics please reach out, I’m here to help