By: Alex Brown
I close quite a bit of residential real estate and in doing so I get the chance to see quite a few contracts. Inevitably I see buyers and sellers loose out because they simply aren’t aware of the framework within which they are negotiating terms. That said, listed below are the most common ways buyers, sellers and agents negotiate for items that won’t ever materialize or otherwise add cost to their closings.
- Fear of Asking Questions
When I address contract issues with agents I find that the most common reason for them is that the agent didn’t want to ask their broker for fear of seeming unprepared. Whether you close with me or not if an attorney has the privilege of being your go to settlement agent part of that service includes being available to field questions when you are drafting a contract. You should have your closing attorney’s cell phone number and they should answer when you call! (678-528-1908) If an attorney is not willing to support your business you should not feel obligated to support theirs. This business is not intuitive and no one goes in knowing how it all works, it’s OK to admit you don’t know everything.
- Seller Paid Closing Costs
Seller paid closing costs are perhaps the biggest area of loss and most underutilized bargaining chip I see in residential Purchase and Sale Agreements. When requesting or accepting seller paid closing costs as a term of your Purchase and Sale Agreement buyer’s agents and buyers should consult with their loan officers first. Many loans cap seller paid closing costs, which means you may think you’ve hit the jackpot with a seller who is willing to contribute 10k but when the closing date comes around you may see that seller paid costs have been capped far lower.
In the scenario above going in knowing that you have a 4k cap on closing costs would be quite beneficial. You could easily submit a counter offer to have 6k worth of new appliances or a new roof instead of simply losing out on those funds. Know what you have to bargain with before negotiating or you may be agreeing to a great price on a bridge to Brooklyn.
- Challenging Bogus Title Related Attorney Fees
My office does not itemize fees, however, most firms do because no one seems to question it. I hear FREQUENTLY, “_______’s settlement fee is only $350 so I use them.” Is it though? If you are using an attorney who offers a settlement fee below $500.00 take a look at the rest of the 1100 and 1300 sections of your HUD. In most cases you will find that fees in addition to the settlement fee are being added to the HUD. Firms keep their “Settlement Fee” low buy taking on junk fees to get the overall price up. Look out for these. The settlement fee and MAYBE one additional fee for post-closing work (since that does actually require office staff time and materials to complete) are appropriate. Any others like a “Title Service Fees” or “Abstract Fees” or “Title Review Fees” are patently bogus. These services are required to close any transaction and should be accounted for in the overall Settlement Fee so challenge them; knowing when you are being bait-and-switched can shave hundreds off the cost of settlement.
- Identifying the Parties
I see this on about 1/3rd of the contracts I receive, agents DO NOT PROVIDE COMPLETE INFORMATION FOR BUYERS AND SELLERS. When you see a sloppy or incomplete contract you know two things: 1) Preclosing is likely to be more expensive, 2) The first contact with a buyer and seller is going to come off as unprepared.
First and foremost, when we receive a contract and begin a file one of the first steps is to get complete information from the seller to allow us to order payoffs, HOA Letters, Lien releases etc. The further that process is delayed because we have bad or incomplete information the more likely it is that there will be rush or expedite fees tacked on when we are finally able to order the items listed above.
Second, our first contact with agents on the transaction and potentially the buyer and seller requires us to acknowledge we do not have complete information. In this business when anyone looks unprepared everyone looks unprepared. Fist contact with a buyer or seller should be, “We have your contract, and everything is fine, feel free to call if you have any questions.” First contact should not be, “Hey what’s your email address and how do you spell your last name we can’t read it on the contract?” The moral here is, PLEASE don’t skip over those “phone number” and “email” lines in your contract! Write this contract like you’re getting paid thousands of dollars to do it, because you are.
- Knowing the Buyer/Sellers Schedule
This is one of the most baffling areas of added expense and I encounter it frequently. You can’t buy a cheeseburger without going to McDonalds or sending someone there for you so it stands to reason you actually need to show up in order to buy or sell a house. Quite frequently we get calls from Agents, Buyers and Sellers the same day of closing saying, “Well I can’t actually be there I’m on vacation.” We can work around travel plans if we know about them ahead of time. We can work around travel plans if we know about them 24 hours before closing too but it’s SIGNIFICANTLY more expensive. Drafting a Power of Attorney, getting it rush approved by the lender, overnight shipping to and from the buyers and setting up a remote notary to sign it is expensive. Set a closing date you can attend to ensure your costs are kept as low as possible.
- Addendums and Exhibits
Attach them, all of them. Thank you! If you have Exhibits A-D and send A and B guess what, that Prelim HUD you need today- it’s not ready. Send your contract in its complete form every time you send it. It’s a good habit and will save time and expense in the preclosing process.
Hopefully this article has been helpful, if you have any questions or are unhappy with your current GA settlement agent we would appreciate the chance to earn your business.
Bagwell & Associates, PC