This week’s question: REAL ESTATE 101 FOR BUYERS. What do you need to know before you sign that Offer to Purchase on the house of your dreams?
QUESTION: We’re trying to buy a house but the market is so hot houses are gone before we’ve made an offer. This time, we’ve signed an Offer to Purchase and paid an earnest money deposit, but we still don’t understand what we agreed to. What have we done and can you help us?
ANSWER: An Offer to Purchase is a contract. Since you have already signed it, you have agreed to its terms. A lawyer can assist by explaining those terms, but may or may not be able to negotiate a better deal for you, depending on the circumstances.
A better strategy would be to consult with a lawyer before you sign. Here are a few of the issues to consider:
- The Offer should allow you to get out of the deal without losing your deposit.
- Insist upon the right to hire a professional to inspect the house for hidden defects such as evidence of water, nonconforming renovations, or electrical or plumbing work that is no up to code. The Offer should allow you to back out of the deal and get all of your deposit refunded based on your own assessment of the inspection, and no one else’s.
- Many Offers limit the parties to remedying any dispute through binding arbitration. It makes no sense to limit your remedies. Consider striking any clause that limits your remedies in case the deal goes sour.
- Make sure your Offer includes a closing date that gives you time to conduct the inspection and get financing in order. Commitments for financing normally have expiration dates. If your closing is too far off, you may have to re-qualify.
In a hot real estate market, it may not be possible to seek the advice of an attorney beforehand. A delay in making an offer may cause you to lose the house of your dreams to buyers who are a step ahead of you. If you’re in that situation, negotiate a contingency clause making the offer contingent upon review by your attorney. That clause alone can make the difference between what appeared to be a great deal but turns out to be a house with too many defects to make the purchase worthwhile. And remember, you may want to back out of the deal because you find another house you like even better!
The lawyers at GWINN TAURIAINEN PLLC are experienced attorneys and are happy to answer your questions. Give us a call for a free initial telephone consultation about your legal needs. For consideration of your questions in our web column, please submit your inquiry on the “Contact Us” page of our website at www.gwinntauriainenlaw.com.
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By: Daniel A. Gwinn, Esq.
Attorney and Counselor at Law
GWINN TAURIAINEN PLLC
901 Wilshire Drive, Suite 550
Troy, MI 48084
(248) 247-3310 facsimile