The buyer or his broker will submit what’s known as a “purchase agreement” or “purchase and sale agreement.” As a legally binding contract, it should be reviewed by your attorney.
Divorce Tip: Have your realtor present the offer directly to your spouse so he or she doesn’t feel pressured. It might carry more weight coming from a neutral party.
All agreements contain the proposed:
- sale price;
- closing date;
- closing contingencies;
- earnest money deposit; and
- a description of the actual interest in real property (type of deed) to be conveyed.
Here is a review of various contingencies:
Financing contingencies. Agreements usually enable the buyer an opportunity to obtain financing. Buyers must be pre-qualified so they don’t tie up your property unnecessarily. If the buyer fails to obtain financing, the earnest money deposit is fully refunded, and you are back to square one.
Divorce Tip: Let your realtor pre-qualify buyers. If the sale falls through because of an unqualified buyer, you can blame the realtor instead of each other.
Inspection results. Many agreements contain inspection contingencies, including structural integrity, termites, systems, etc. If the inspector finds problems, the buyer is released from his obligation. However, the buyer may try to renegotiate the agreement and adjust the price accordingly. The buyer’s lender will probably require a certificate from a licensed inspector.
Divorce Tip: Work closely with both your realtor and your spouse. Don’t forget to anticipate and fix potential problems. The best surprise at a closing is no surprise.
Appraisal. Your buyer’s lender will require an independent appraisal. Generally, the amount of the loan can be no more than 95% of the appraised property value or purchase price, whichever is less. Don’t be surprised if there is an appraisal contingency.
Environmental hazards. Buyers are increasingly adding this contingency. It might include the presence of radon, asbestos, lead-based paint, or other toxic materials.
Title. You and your spouse will have to provide title, free of any encumbrances. The buyer’s attorney or a title company will conduct a title search.
Closing date. You will be required to sell, and the buyer will be required to either buy or forfeit his deposit, on or about a certain date. There is usually some limited flexibility, but if the contract says “time is of the essence,” then you must close on the stated date. If you fail to close, the buyer could sue, forcing you to convey the property.
Divorce Tip: Make sure you and your spouse are comfortable with the closing date; once you sign the agreement, there’s no turning back.
Earnest money deposit. The buyer must include a deposit, often 5% of the sale price. However, the amount depends mostly on local custom and practice. If the buyer fails to perform, assuming it’s not your fault, the buyer generally forfeits the deposit.
