A real estate contract is an essential part of any real estate transaction. The contract details the rights and obligations of each party and provides the basis for the closing or finalizing of the deal. While purchase and sales agreements should protect the interests of parties to a real estate transaction, disagreements may arise. As a real estate contract lawyer in New York, Sabrina Rabban works closely with clients to help them negotiate and finalize their real estate contracts.
What is Involved in Real Estate Contract Negotiations?
Real estate contract negotiations involve reaching an agreement between a buyer and seller (or landlord and tenant, in the case of leases) regarding the terms of a real estate transaction. These negotiations cover the key elements of the contract, such as price, closing date, contingencies, and other critical aspects of the deal. Success in real estate contract negotiations depends on understanding both legal aspects and the market dynamics, while ensuring effective communication with clients and with other parties.
Common Elements of Real Estate Contract Negotiations
Purchase Price
- One of the primary terms negotiated in a real estate transaction is the price of the property. Offers and counteroffers are exchanged until two parties agree on a final purchase price.
Contingencies
- Inspection Contingency: Buyers typically want an inspection of the property to identify potential defects. After the inspection, the buyer may request repairs, renegotiate the price, or back out of the deal based on inspection results.
- Financing Contingency: This allows the buyer to back out of the contract if they are unable to secure a mortgage or other financing. Sellers might negotiate to shorten the timeframe or limit the type of loans buyers can apply for.
- Appraisal Contingency: This ensures the property appraises at or above the agreed price, confirming its value. If the appraisal is lower, buyers can negotiate a price reduction or choose to walk away from the deal.
- Sale Contingency: Some buyers need to sell their existing property before they can buy a new one, so this contingency allows the buyer to sell their existing property before committing to a new purchase.
Closing Costs
- Negotiating who pays for the closing costs (e.g., title insurance, attorney fees, escrow fees, taxes) is a key part of the transaction. In some markets, the seller may agree to cover part or all of these costs, while in others, sellers might refuse.
Repairs and Improvements
- After inspections, buyers may request that sellers address certain repairs before closing. Negotiations may focus on which repairs the seller will agree to complete, provide credits for, or refuse to handle.
Closing Date and Possession
- The closing date is when the ownership of the property transfers from the seller to the buyer. Both parties typically negotiate the timing of the closing to accommodate their respective needs (e.g., moving timelines, financing arrangements). Sometimes, possession of the property might be delayed after the closing, allowing the seller extra time to move out.
Inclusions and Exclusions
- Items such as appliances, light fixtures, and window treatments may be included in or excluded from the sale. Buyers and sellers negotiate which items remain with the property and which will be taken by the seller.
Property Taxes and Prorations
- Property taxes and other fees (such as homeowners’ association dues) are often prorated between the buyer and seller at closing. Negotiations determine how these costs are divided based on the closing date.
What is the Role of a Real Estate Lawyer?
Real estate contract negotiations are a critical component of buying or selling property. Your lawyer plays a crucial role during contract negotiations, ensuring that the legal aspects of the transaction are properly addressed and protecting the interests of the client, whether they are the buyer, seller, or a lender.