NEGOTIATING THE REAL ESTATE DEAL

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Successful negotiating encompasses the acquired ability to use certain skills and techniques to bring about coveted win-win results. Your Loyal Brown Dog Agent can help you stay focused, objective, and not let your emotions rule.

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1. Start with a thoroughly researched, fair price.

2. Respect the other side's priorities. For example, a buyer with an urgent move-in date might be willing to pay a higher portion of the transaction costs or forgo some major repairs. Or, they may prefer to push out the closing date, in order to be more confident that there will be no unanticipated additional expenses.

3. In any case, be prepared to compromise: "win-win" doesn't mean both the buyer and the seller will get everything they want. It means both sides will win some and give some

TIP: Become familiar with a typical real estate purchase and sale contract in advance of any negotiation. For more information on common terms and regulations, visit our Realty Terms to know tab.

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SELLER FINANCING

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If a seller helps to finance a real estate transaction, it is called seller financing. Usually sellers do this when a buyer has difficulty qualifying for a conventional loan or meeting the purchase price.

Seller financing differs from a traditional loan because the seller does not give the buyer cash to complete the purchase, as does a lender. Instead, it involves extending a credit against the purchase price of the home.  

The necessary paperwork is prepared by the title or escrow company, after the terms are worked out between the buyer and seller. If you are a seller considering such an arrangement, it is critical to thoroughly evaluate the "credit-worthiness" of the buyer.

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It is important to consult with legal counsel and your accountant regarding the potential consequences of this type of arrangement. You can also contact the Internal Revenue Service for a copy of its Publication 537, "Installment Sales." Order by calling (800) TAX-FORM or visit www.irs.gov/formspubs.

Seller financing offers tax breaks for sellers and alternative financing for buyers who can't qualify for conventional loans. If you are a seller, the risks you face are the same as those facing any lender: Is the borrower a good credit risk? Will the property hold enough value over time to allow for the repayment of all loans made against it?

You should run a full credit check on the borrower, require hazard insurance on the property and include a due-on-sale clause. There also are financing, disclosure and repayment-term requirements that need to be met. Again, it is wise to consult an attorney when considering this type of transaction.

TIP: The interest rate on an owner-carried loan is negotiable, but is influenced by current Treasury Bill and Certificate of Deposit Rates.

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HOME INSPECTION

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A home inspection is a thorough visual examination of the home and property. Many mortgage companies insist on a home inspection report before agreeing to a mortgage, so a pre-sale inspection enables you to address problems before you even put the house on the market. It also removes any questions about the condition of your home for you and a potential homebuyer, improving the speed, price and likelihood of a sale.

Most Residential Home inspections usually takes two to three hours, during which time the house is examined from the ground up. It includes observation and, when appropriate, operation of the plumbing, heating, air conditioning, electrical, and appliance systems, as well as structural components, such as the roof, foundation, basement, exterior and interior walls, chimney, doors and windows.

Some home sellers elect not to correct every defect found in the inspection report. Instead, they acknowledge the defects to buyers and explain that the asking price has been adjusted to reflect the estimated cost of repairs. Such candor tends to shorten negotiation time, because buyers have fewer objections.

In addition to facilitating the sale of a home, an inspection helps the homeowner comply with full-disclosure real estate laws, governed by state laws. By focusing on the condition of your property, you are less likely to overlook a defect or material fact for which you could later be held liable.

A thorough home inspection covers more than 1,000 items, everything from the foundation to roof and takes two to three hours depending on the size of the property. The report should reflect the condition of about 400 items.

TIP: Home inspections are for buyers; appraisals are for lenders. Lenders require appraisals on properties prior to loan approval to ensure that the mortgage loan amount is not more than the value of the property.

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