Sometimes a Buyer will get nervous when the moment finally comes to sign a contract. He may be afraid that he could change his mind about the property, or that perhaps there's "fine print" that commits him to do something he didn't intend. I always make sure that my buyers understand that the contracts Realtors use are standard, Real Estate Commission approved documents, and that clients are most welcome to take them to an attorney for review if they feel at all uneasy.
I also explain that the Colorado Contract to Buy and Sell Real Estate offers several protections for the Buyer, opportunities to terminate the transaction and get earnest money returned. For instance, should the bank appraisal come in much lower that the agreed upon purchase price, the Buyer can negotiate with the Seller or terminate the contract. Or if, in fact, he can't get approved for the loan and terms he thought he could afford, he can legally cancel the agreement.
Another opportunity to terminate is presented during the property inspection period. Often, buyers hire a professional inspector, sometimes several, to go over the property more closely to discover any defects that were not apparent during regular showings. The inspections can range from a standard once-over of the structure and systems to sewer scoping and radon tests, but include anything that can be discovered about the property by the Buyer. For instance, upon further investigation of the area, the Buyer may find that the empty land behind the home is not zoned residential, and decides that he doesn't want to back to future commercial buildings.
A few things to remember about the inspection period. Even though the Buyer does not have to disclose the specific reason for the termination, he had better have one. The purchase agreement states that the Buyer is signing the contract in good faith, meaning that he fully intends to follow through with the purchase of the property. If the Seller has reason to believe that the Buyer did not act in good faith when he terminated the contract (e.g., really just wants to buy another home instead), the Seller may be able to make a case to retain the earnest money as liquidated damages.
Another important point to keep in mind when addressing inspection issues with the Seller: the Inspection Notice is not intended to renegotiate the deal. It is to address significant structural, system or safety issues that affect the value of the home the Buyer thought he was getting. A Seller will assume that a Buyer has taken into consideration the apparent condition of the property when making his offer. She will expect that the offer price reflected the understanding that the fence is falling down and that the front door will need to be replaced. She should expect, however, to repair, replace or otherwise compensate the Buyer when his inspection reveals that the A/C unit is not actually functioning.
Sometimes in a seller's market, buyers are forced to move quickly on properties they may not have had the time to fully consider. Especially in the case of multiple offers, a Buyer may feel that he has ultimately overpaid during a bidding war and will try to use the inspection items to recoup his money through significant Seller concessions or a price reduction. This is why it's important to have a Realtor who knows the area well arm you with current sales data and professional advice. Proceeding knowledgeably from the beginning will put you in the strongest negotiating position and pave the way for a smoother transaction.
images: Marc van der Chijs, AmberStocel
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