What follows is a discussion of the most important points to consider when you are negotiating the terms of the Purchase and Sale Agreement. Absorb it all, or soak in what interests you most:

Your Realtor
Be aware that if your offer is accepted before expiration or rescission (cancellation by you), it is legally binding. Even some of the most experienced home buyers do not want to be legally responsible for an issue as complicated as a home purchase without having an experienced professional on your side. Case in point: we recently worked with a buyer who heads the Real Estate division for a major firm. His entire job was buying, selling and developing commercial locations for his employer. There was probably no one more qualified than he to negotiate and write the contract for the home he wanted, but for a variety of reasons he still used our services.

Be sure to choose a Realtor who is experienced with these negotiating techniques and who understands how to write a contract that will both protect you and be acceptable to the lender.

Sales Price
For most home purchasers, the sales price is the most important term. Make sure you recognize that other non-monetary terms of the agreement are also very important.

Title
“Title” refers to the legal ownership of your new home. The seller should provide title, free and clear of all claims by others against your new home. Claims by others against your new home are known as “liens” or “encumbrances”. The seller usually pays for the Owner's Title Policy, though this is also negotiable.

Financing Contingency
The Purchase and Sale Agreement should provide that your Earnest Money Deposit will be refunded if the sale has to be cancelled because you are unable to get a mortgage loan. For example, your agreement of sale could allow the purchase to be cancelled if you cannot obtain a mortagage at or below an interest rate you specify in the agreement and with a certain percentage down (i.e. 3% down).

The Agreement will also specify how many days you have to apply for the mortgage and at what point the seller may demand that you waive the Finance Contingency. Your Realtor should provide you with a timetable of when these critical deadlines will occur.

Negotiating “No Money Down” Programs
In general, zero-down loans are usually structured such that the seller “donates” the down payment plus a fee to a non-profit agency which is established for the loan program. The agency then “grants” the down payment funds back to the buyer. Like seller-paid closing costs, the seller views this as a reduction in the sales price and the home will need to appraise for the higher price.

Generally, you will need to add between $10,000 - $12,000 to the purchase price to cover a zero-down program (to cover the down payment and the closing costs). For a full-priced offer, you may simply add these costs on to the purchase price. Closing costs will also need to be added for you to pay truly nothing down. But bear in mind that when you add these costs to produce a genuine zero-down situation, the seller will have to pay Realtor fees and taxes based on the higher sales price.

Negotiating for the seller to Pay Closing Costs
Closing costs can be estimated roughly to be about 3% of the home's purchase price. Often, these costs can be “financed into” the home by negotiating for the seller to pay all closing costs and allowable points on the loan. From the seller's point of view, this is the equivalent of reducing the purchase price by the given amount.

You may also opt to offer “full price” for the home by increasing the price to cover the closing costs. However - as mentioned above - the seller will still have to pay items such as the Realtor fees and taxes based on the higher purchase price. The only risk is that the home will not appraise at the higher price. (Fortunately, most homes have been appraising to cover these extra expenses.)

In some cases, the listing agent may need to change the record in the Multiple Listing Service to the higher list price. Timing is critical in some of these cases - changes must be made in a certain order, and documents submitted such that the records are acceptable to the lender.

Inspection Contingency
It is a good idea to have the home inspected. An inspection should determine the condition of the plumbing, heating, cooling and electrical systems. The structure should also be examined to ensure it is sound and to determine the condition of the roof, siding, windows and doors. The lot should be graded away from the house so that water does not drain toward the house and into the basement.

Lead-Based Paint Hazards
If you buy a home built before 1978, you have certain rights concerning lead-based paint and lead poisoning hazards. The seller or sales agent must give you the EPA pamphlet Protect Your Family From Lead in Your Home or other EPA-approved lead hazard information (If you would like to receive a copy of this publication, please contact us). The seller or sales agent also must disclose what the seller knows about the home's lead-based paint or lead-based paint hazards and give you any relevant records or reports.

You have at least ten days to do an inspection or risk assessment for lead-based paint or lead-based paint hazards. However, to have the right to cancel the sale based on the results of an inspection or risk assessment, you will need to negotiate this condition with the seller.

Finally, the seller must attach a disclosure form to the agreement of sale which will include a Lead Warning Statement. You, the seller, and the Realtors will sign an acknowledgement that these notification requirements have been satisfied.