Real Estate Contract Contingencies

Contingencies

As we move into a market where buyers have more influence in a negotiation, let’s look at how contingencies are handled in a more typical environment.
In a seller's market most sellers would not accept the contingency that the buyer must sell their home in order to purchase the new one. A potential buyer would be expected to already have their home listed with an agent and, ideally, have an accepted offer on their home.
Other contingencies that buyers previously had to forego are becoming more common again. For example, a buyer may make their purchase contingent upon their capacity to obtain financing. A buyer may also want to predicate his offer on the home appraising at or above the sales price. Since the appraiser is hired by the lender and is independent of the actual transaction, this is not an unusual request.
Most other types of legal contracts are fixed at the time of offer and acceptance. Both parties are expected to fulfill their obligations and if either attempts to renegotiate any point, the other party can withdraw.
Real estate contracts differ in that they contain clauses that allow renegotiation within limited areas. For example, a contract may require a buyer to get a home inspection within fourteen days. The buyer is allowed a certain amount of time to review the inspection and request the repair of any noted deficiencies. At this point the buyer and seller renegotiate that aspect of the agreement. The seller then decides to make the repairs or not. During this process the buyer must decide whether it is worth losing the house over the issue or not, and the seller must decide whether it is worth losing the buyer and putting the home back on the market.
Contingencies are a normal part of a real estate transaction, but only in areas specifically noted in the agreement. An informed reading of the contract will allow the best decision at each point in the negotiation.

Improving Home Showings

Simple ways to improve a home showing

As we move into the Spring selling season here are some things to consider when preparing a home for sale. Critically view your home’s curbside appeal. The potential buyer’s first impression is of key importance, as the decision to purchase comes from the ability of the buyers to envision themselves living in the home. Any apparent, even minor, defect will distract the buyer from this idea. Sprucing up the landscape, especially in the front yard, is fairly easy and inexpensive. Add colorful and flowering plants. Water and fertilize grass well so that it is green and lush. Be sure bushes, trees and grass are well trimmed.
The front door should be in excellent condition. This is a home’s primary symbol; typically it reflects the home’s general condition and leaves an impression that can affect one’s experience in viewing the rest of the house. Give both the interior and exterior of the home a coat of paint wherever it is needed. Keep adjoining rooms in the same color palette to make the home appear larger and flow better. Hire a professional to paint windows and any other details. Repair leaky faucets, loose knobs and handles, crooked cabinet doors; anything that gives the wrong impression of the home’s condition. Install new light switch covers, especially in high traffic areas. Make sure closets, shelves and counters are as neat and uncluttered as possible. Remove all objects or papers that make a room appear disorderly.
Edit extraneous furniture and accessories, including family photos. If needed, use slipcovers to create a more unified space. Generally the emptier a room is, the more spacious it looks.
When the property is to be shown, be sure to open all blinds and drapes to brighten the rooms. If necessary, leave lights on in darker areas. Attention to these details before selling can substantially increase the value and limit the amount of time your home is on the market.

Cost vs Value / 2005

What Renovations Add Value at Resale?

The amount that a remodeling project adds to the sales price depends on the condition of the rest of the house as well as the value and condition of comparable homes nearby. In some cases, the value of a remodel at resale is more than 100 percent of its cost. This generally happens in markets where property values are rising rapidly, but it can also occur when buyers regard certain types of amenities as standard for the area. For example, in a neighborhood where most homes have an updated kitchen, remodeling may well increase the value of the home beyond the cost of construction. Conversely, having an outdated kitchen in this case could cause the home to sit on the market for longer and eventually sell for less than similar homes in the area.
Four renovations produce the greatest return in our region. Two projects, siding and window replacement, reflect the importance placed on appearance and efficiency; the others, kitchen and bath renovations, are consistent performers in almost all markets. In the eastern U.S. updating a 200 square foot kitchen, including new countertops, cooktop and wall oven but replacing only the cabinet fronts costs $15,172 on average and recoups 100.9% of this when the house is sold. Improving an outdated bathroom including replacing fixtures, a tub with ceramic tile surround, standard toilet, solid surface counter with double sink, recessed medicine cabinet with light, ceramic tile floor, and vinyl wallpaper will run $10,978 on average and add 104.4% at resale. Replacing 1,250 square feet of existing siding with new vinyl siding, including all trim will cost $7190 and recoup 103.7%. Replacement of 10 existing 3-by-5-foot double-hung windows without disturbing the interior trim will run $9831 and will recoup 90.4% of it’s value at resale.

Renovations can be a smart investment, but ultimately the best reason for a remodel is to enjoy the improvement of your home. If you would like a copy of the complete 2005 Cost vs. Value Report, please send an e-mail to sean@smre.net.

Disclosure Update

Recent Disclosure Changes for Maryland Sellers

For many years, sellers of single family residential property could either fully disclose known conditions and defects in their house, or they could opt to disclaim disclosure. In other words, sellers could advise their prospective buyers, in writing, that the "owner of the real property ... makes no representations or warranties as to the condition of the real property ... and the purchaser will be receiving the property 'as is', with all defects which may exist." Most chose to disclaim and recently, with situations involving competing offers, they have been able to turn down contracts with contingencies for home inspections.
As of October 1st, Maryland sellers must now disclose actual knowledge of any latent defect. The new law defines a latent defect as a material defect in a property, or an improvement to a property, that a buyer (or home inspector) would not reasonably be expected to ascertain or observe by a careful visual inspection and that would pose a direct threat to the health or safety of the buyer or a person living in the property. The law does not stipulate that a seller must investigate whether there are problems, pay for repairs or reveal everything about the condition of their house.
Additionally, if there is a real estate broker or agent involved in the transaction, and if he has personal knowledge of any latent defects, he is legally obligated to disclose those defects to the potential purchaser, regardless of whether the seller discloses or disclaims. The agent or broker cannot assist in fraud.
There are several exemptions to the new disclosure requirement. For example, new homes that have never been occupied (or for which a certificate of occupancy has been issued within one year before a sales contract is entered into) are not required to provide disclosures.
Additionally, if a trust or fiduciary party is involved in the administration of an estate, no disclosures are required.
There is a growing body of law throughout the country relating to disclosure requirements. As we emerge from a time when conventional wisdom held that the buyer should always beware, seller disclosure is becoming an important part of any real estate transaction.
Sellers should not be afraid to disclose known problems in their house. In my opinion it is better to disclose at time of listing, rather than be sued by a buyer after discovering not only that there are defects in the property, but that the seller knew, or even should have known, of before the sale.
I believe it is in the sellers best interest to tell the truth about the condition of their house, especially in a market that it is likely to sell in anyway.
This article is for informational purposes only and should not be construed as legal advice. Seek professional legal counsel if you have any questions regarding this matter. A copy of the new disclosure form can be found at: http://www.dllr.state.md.us/forms/default.htm - re.