Real Advisor -Buying Guide For Homes & Real Estate Information San Francisco Bay Area

An offer becomes a valid contract when both parties mutually agree on all terms and conditions. A contract is an agreement to do or not to do a certain thing. It is essential for a valid real estate contract to have mutual consent of capable parties, consideration and should be legal in formation and nature. Accordingly, all offers should be in writing. Although there are cases where an offer will be accepted right away, it is usually better for the seller to take a day or two to review the offer. This also gives the buyer a chance to feel comfortable and sure of his or her offer. It is better for both parties to avoid getting into a contract that will fall apart later. All good contracts should contain the following terms and conditions that are mutually acceptable to both buyers and sellers:

Complete property address
Names Of all buyers
Date The offer was written
Purchase price In both words and figures
Deposit The amount of deposit is critical. A higher deposit shows the buyer's interest and intent to buy. It is recommended that the deposit check be held at the escrow company, instead of in a Broker Trust Account.
Increase deposit A buyer may increase his or her deposit after removing financial and/or property contingencies. This can increase the seller's confidence in the buyer's intent and capability to close the transaction.
First loan The amount, type, interest rate, period, and points of the first loan are factors to be taken into consideration. The higher the down payment and the lower the "loan to value", therefore a better chance for a buyer to qualify for a loan. It is important to know if the terms and conditions of the first loan are reasonable for today's market, because if they are not, the buyer could cite this as a reason to get out of the contract.
Additional financing The amount and terms of any additional financing with which the buyer plans to supplement the first loan - either from a private lender or the seller - must be clear. In the case of seller financing, make sure all terms and conditions are acceptable. In the case of secondary financing, take into consideration the buyer's need to qualify for and obtain loans from two separate lenders, which could cause a delay in closing.
Loan contingency Refers to the period of time in which the buyer must obtain financing. The buyer needs to remove any financing contingencies within a certain number of days after acceptance of the offer. Buyer should only remove loan contingency after he or she has received, formal commitment from a lender for the loan amount specified in the contract and the property. The buyer should provide a pre-qualification letter at the time of acceptance. However, it is preferable to get a formal loan approval, or pre-approval, from a lender assuring that a buyer is qualified for the loan amount specified in the contract. In the case of a cash offer, the buyer should provide a statement or proof about the source of funds with which he or she will close the transaction. A buyer's down payment is never a contingency.
Escrow Should define when the buyer intends to close the transaction. The actual date of closing should be specified rather than the number of days required for the escrow to close.
Proration Taxes, principal and interest, insurance, HOA fee and other recurring costs, are to be prorated from the date the deed is recorded.
Possession Is the date and time that the seller intends to hand over the property to the buyer. Possession of the property is typically taken between 1 p.m. and 5 p.m. of the day the deed is recorded. If the seller cannot vacate the property by then, a lease-after-sale document should be prepared.
Occupancy Is a disclosure from the buyer as to whether the property will be their primary residence and they intend to occupy the property, or whether it is an investment property that they do not plan to personally occupy. A lender may require a larger down payment from the buyer for investment properties.
Allocation of closing costs, which vary according to the county or city in which the property is located, is customary - although they remain a negotiable item. Some of the normally incurred costs are:
1. Taxes The seller typically pays County transfer taxes. City transfer tax applies only in certain cities, and varies by amount and responsibility to pay (refer to Closing cost schedule by county and city).
2. Escrow fee Is based on the property's sale price, and typically varies from one escrow company to another. Responsibility for payment of the escrow fee varies by county, although the party paying the fee has the right to choose the escrow company (refer to Closing cost schedule by county and city).
3. Owner's title fee (CLTA) Is a fee based on the sale price. The party that pays the fee varies by county (refer to Closing cost schedule by county and city).
4. Inspection reports For termites, roof and other items, are normally paid for by the buyer. Termite reports typically range from $75-150, roof inspection $50-75 and property inspection costs range from $150-500, based on the size of the property. If the seller would like to recover from the buyer the costs of inspections already completed, this should be mentioned in the seller's counteroffer, along with copies of the inspection reports.
5. Home warranty This fee is typically paid by the seller and is based on type, size and coverage, and ranges from $150-400. The seller should provide a home warranty to the buyer, unless the property is new.
6. Disclosures Geological zone disclosures typically cost between $50-80, while homeowner's association documents provided by the management company range from $50-150. (Order a Geological Zone Disclosure).
7. Reconveyance fee Is paid to the seller's lender and typically costs $60-75.
8. Notary recording and drawing fees Are paid to the escrow company, and cost approximately $150.
9. Commission Is a fee paid to real estate brokers, representing both the seller and the buyer, typically six percent of the sale price.
10. Repairs Costs for termite, roof and other repairs are based on the type of work required, and are a negotiable item.
Property maintenance The property shall be maintained so that it remains in the same condition as when the buyer made his or her offer.
Personal property Items such as the refrigerator, washer and dryer, and fixtures, are considered personal property, when they are to be included in the sale.
Contingency of sale of buyer's property Is included when the buyer needs to sell his or her current property prior to close of escrow in order to purchase another home. The seller retains the option to continue to show the home to other prospective buyers. If the seller receives another, non-contingent offer, the seller may give the first buyer an option to remove the contingency - normally within 72 hours. If the contingency is not removed, the seller has the option to void the first contract and accept the new offer.
Time frame to remove property contingency Is the period that the buyer has to research and inspect the condition of the property. This period gives the buyer an opportunity to have inspections done by licensed contractors. The removal of the property contingency indicates that the buyer is satisfied with the condition of the property, subject to any repairs that the seller must complete prior to the close of escrow. The seller may have the option to refuse any or all the repairs, in which case the buyer may have the option of proceeding with the contract or backing out. All contingencies and contingency removals should be in writing.
Liquidated damages When the buyer and seller initial this item in the contract, the buyer agrees to pay damages to the seller in case the buyer defaults on the terms of the contract. The seller shall have the option to collect the entire deposit to a maximum of three percent of the purchase price.
Mediation and Arbitration By initialing a mediation clause of the contract, the buyer and seller agree to attempt to resolve any disputes through mediation before resorting to arbitration. By initialing the arbitration clause, the buyer and seller agree that a third-party arbitrator shall make a decision about any dispute or claims which may arise, and which could not be settled through mediation. Also, by agreeing to arbitration, both buyer and seller give up their rights to litigation in court or in a jury trial.
Other terms and conditions Apply when the buyer has expressed specific needs.
Agency confirmation Is necessary when agents representing buyer and seller are involved.
Acceptance Ensures that all buyers have signed the contract, and that any commissions to be paid are indicated in the contract. It is also necessary for all sellers to sign the contract and initial the applicable items.

Closing Cost Schedule

Mediation

Arbitration

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