Buying Issues

You have decided to move forward and make an offer on the space. Think about what you are willing to pay, and under what conditions and terms. Also, ask the following:

• How soon do you want to take possession of the property?
•  What compensation should you get if you can’t take possession of the property by the stated date?
• What repairs do you require?  
• If you are purchasing a multi-unit building, do you want the tenants to move by the time you take possession of the building, or can they stay?
• What equipment or appliances would you like to purchase with the property? Do you want a washer and dryer, welding tables, dancing bars, etc.? If so, how much are you willing to pay? Or do you not want these items at all, and how much do you want knocked off the price?
• Who will pay which closing costs?
• For residential properties, review the seller’s disclosure form and look for problems. By law, sellers are required to disclose in this form any latent or hidden defects or problems with the property that s/he knows exists and will affect the property’s value. Your real estate agent and/or attorney should review this document as well. Click here for an example of a disclosure form.

Once you have thought about what you will and will not do to obtain the property, you will then sign and detail your offer. Once the seller signs your offer, it becomes a legally binding contract called the Purchase and Sale Agreement, or P&S. This contract is a legal agreement between you and the seller that binds both parties to the sale of the property and prevents the seller from selling it to someone else while the contract is in effect.  

After you’ve made an offer, and the contract has been signed by both parties, the seller’s agent will require you to make a deposit in order to hold the property. These funds are known as Earnest Money, and -- depending on the stipulations of your contract -- might be forfeited if you fail to live up to the terms outlined in the agreement. Failure to fulfill the contract’s terms can also result in you being liable for damages incurred by the seller if you fail to meet your obligations.  

The P&S contract is one of the most important documents you’ll sign during the entire purchasing process. Failure to live up to its terms can have serious financial and legal consequences. Your agent should assist you so that you can make an offer you can fulfill. Have your attorney negotiate the terms of the contract as well.

When drafting the contract, address the following to protect your rights to either void or renegotiate it:

• The building inspection does not meet your requirements. Define your standards, and what you will not accept. For example, you’ll lower your offer if the roof needs to be replaced in the next 2-5 years.  
• You are unable to secure financing to purchase the property by a set date.
• Damage or vandalism to the property occurs, or is discovered after the P&S is signed.
• The appraisal of the property is below the selling price (this might affect your ability to secure financing for the property).
• The survey of the property does not meet your requirements. For example, the survey reveals the lot is 100 square feet smaller than quoted.
• The deed has liens or other problems.  
• Include an attorney approval period, during which both sides can make changes to the contract on almost everything except the price, dates and real estate agent’s compensation (if applicable).
• Any additional issue that would prevent you from purchasing the property.

Buying a property is one of the most expensive purchases you will probably ever make, so take your time to think about what you can and cannot compromise on before making an offer. Once the property is yours, so are the payments and any problems that come with the space.