In a previous article, we discussed the importance of learning to use the “standard” real estate broker contract rather than the “seminar” contract when dealing with real estate agents. The following are some essential clauses and modifications I use when selling a property:
Limited Inspection Clause – Most standard broker contracts give the buyer the right to make the contract contingent upon the right to do a thorough inspection before a certain date. Make certain that the inspection period is short and that the inspection must be done by a licensed (if they are in your state) professional inspector. Limit objectionable items to roof, plumbing, electrical, heating and structural defects. An open-ended inspection clause will permit the buyer to “weasel” out of a contract because the garage door squeaks.
Choice of Escrow Company – As the seller, I insist on the right to choose the title or escrow company so that I remain in control. A conservative or uncooperative escrow or title company can make life very difficult if you are trying to do a creative deal.
Qualification of Buyer – The most important thing to keep in mind when selling is that time is money! The single biggest mistake sellers make is allowing an unqualified buyer to tie up their property under contract for two months. Do not believe any claims of the buyer, his agent or mortgage broker about their ability to qualify for a loan. You should know exactly what the qualifications are for an FHA or FNMA loan in your area and qualify the buyer yourself.
I use the following clause:
“Within 48 hours, buyer shall provide seller with buyer's complete financial and credit information for seller's approval. Within 72 hours after receipt of such information, Seller may terminate this contract and refund buyer's earnest money if, in seller's sole opinion, buyer does not have the creditworthiness to qualify for a loan from a third party. Seller's decision and opinion shall be final in this regard, and buyer shall have no further recourse after return of this earnest money deposit.”
NOTE: Be certain you do not engage in illegal discrimination in rejecting a buyer's credit worthiness.
Permission to Contact the Lender – I hate being in the dark! I always want the ability to control the entire loan process and be able to get information from the lender along the way. The buyer's lender won't talk to you directly, without express written permission of the buyer.
To remedy this problem, insert the following clause:
“Buyer hereby gives express permission to all parties, including lenders, employers, financial institutions, credit agencies, mortgage brokers and real estate agents to release any appropriate financial information to the seller.”
Now you can take control, get on the phone and scream “What's holding up this loan!”