Clauses to Consider When Writing Offers

THIS document will give you some negotiating tips. 

General Clauses 

• If you are related to the buyer - “Buyer’s agent related to buyer”

• What personal property will remain - You should put in writing which appliances and movable structures (ie shed, swingset) are to remain.  DO NOT Put appliances to remain as per mls, spell out the appliances so there is no confusion. Be careful not to include any other personal property as the lenders will have problems getting it through underwriting (ie kitchen table, flat screen tv, etc). If the buyer and seller wish to agree on terms for personal property items they must make other arrangements for that. “Stove, refrigerator, washer, dryer and shed to remain for buyer’s enjoyment”

• What real property will not remain -  “Seller to have gazebo removed prior to close”Are there any

• Leased items in the property (water tank, solar ect) "Subject to review, acceptance, and transfer of lease on xxxxxx" Leases items in property - If the cost of the Leased item will negatively affect client getting loan or if client wants leased items payed off  "Seller to pay off lease on xxxx, and provide to buyer proof of payoff."

• Closing costs - “Seller to pay up to $5,000 towards Buyer’s closing costs, points, prepaids, and escrows at closing.” 

• When buyer has to sell another property 

  • Strongest - “Subject to the sale of buyer's property at 123 main street which is under agreement, through inspections and mortgage commitment has been obtained. The property is scheduled to close xx/xx/xx”

  • Stronger - “Subject to the sale of buyer's property at 123 main street which is under agreement, through inspections and waiting on mortgage commitment.  The property is scheduled to close xx/xx/xx”

  • Strong -“Subject to the sale of buyer's property at 123 main street which is under agreement and scheduled to close xx/xx/xx”

  • Weak - Subject to the sale of buyer's property at 123 main street which is currently listed.

  • Weakest- Subject to the sale of buyer's property at 123 main street which will be listed on date.

• For the two week offers above, you may wish to include a kick out clause where seller can entertain other offers and potentially bump out your buyer. “Buyer agrees to a 48hr kick out clause.  Specific language for the 48hr kick out clause to be agreed upon by the attorneys. “

• " Subject to the sale of buyer's property at 123 main street which is under agreement, through inspections and mortgage commitment has been obtained. The Buyers will cover up to $2,000/mo of the seller’s carrying costs, starting on x date, until closing. "

  • • If your buyer is still not getting accepted offers on their Property, consider increasing the ESCROW deposit by a few thousand dollars and commit to using it to cover carrying costs for the seller until closing. 

    • If your buyers are opting for a cash deal after the sale of their home, the offer can further be strengthened by getting a pre-approval for financing back-up. "Buyers to obtain a pre-approval for mortgage for financial back-up".

  • When buyer has to sell another property, but is willing to reduce the price until it sells

• If buyers are unable to get an accepted offer on the home they need to sell in the next 2 weeks,  they will reduce the list price by $5,000.  They will continue to do this every 2 weeks until the home sells. 

• When seller has indicated they need to find suitable housing - Contingent on seller being under contract on their next property within X days (ie  maybe give 30-60 days) and closing on their next property within Y days.  If seller is not under contract within x days or able to close within Y days, then this contract is null and void unless both parties agree to extend these contingency dates.  In this scenario, try to set inspection for after seller finds suitable housing. (ie Inspections within x days of seller being under contract on next property)

• • Closing both properties same day - “Buyer’s current home and 123 main street to close concurrently”

  • Inspection Waiver

    • Option 1- “Buyer will be waiving inspections and is willing to take possession of the property AS-IS”.  If you do this make sure the buyer signs THIS inspection waiver. Due to state regulations In Massachusetts: a buyer or their representative cannot state that they intend to waive inspections prior to an accepted offer.

    • Option 2 - "Buyer will be waiving inspections but ... ( use this if there is 1 specific item the buyer would still like to inspect , typically something structural or mechanical ex: roof, pool , heating system)"

• AS IS for informational purposes only - ( this means you can still inspect but not ask for repairs unless something significant comes up) … plus is buyer reserves the right to back out if the inspections are not up to their satisfactions)Inspection for informational purposes only - There are different levels you can suggest when using this clause ...

Option 1: “Buyer will complete inspection for informational purposes only. Buyer retains the right to terminate this contract on account of the results of such inspections or tests being unsatisfactory and to have all deposits returned to Buyer in the event of such termination.”
Option 2: “Buyer will complete inspection for informational purposes only and will only ask for items to be repaired if the repair value is more than $xxx (ie 5,000). Buyer retains the right to terminate this contract on account of the results of such inspections or tests being unsatisfactory and to have all deposits returned to Buyer in the event of such termination.”
Option 3: “Buyer will complete inspection for informational purposes only and will only ask for items to be repaired if the repair value is less than $xxx (ie 5,000). Buyer retains the right to terminate this contract on account of the results of such inspections or tests being unsatisfactory and to have all deposits returned to Buyer in the event of such termination.”. 

All of the Above terms can also be used without “for informational purposes only” If your clients are doing standard inspections
* With all Options we would highly recommend telling the other agent that you already have inspections scheduled (ideally in the next 48hrs) so that you wont tie up property for very long.

• VA Loans
  
  

  • These are typically 100% financing and the buyer will actual get his/her deposit back - “Deposit to be returned to buyer at close”

• Close by a certain date - “Time is of the essence”  Check with attorney regarding use of this language.

• Increasing compensation to the Buyers Agent - If the compensation is low and you and your buyer have an agreement for a higher compensation, the buyer may ask in the offer that you be compensated at a higher rate. “Seller to pay buyer’s brokerage 3% of the net sale price at closing”.  You may then need to explain to the other agent that the seller should consider the net offer on the table.

• When the buyer would like repairs done - “Seller to have licensed roofing contractor install a new three tab asphalt shingle roof prior to close.  Contractor to replace any damaged decking revealed when existing shingles are removed”

• FHA Financing - If your buyer is getting FHA financing and there are obvious repairs needed to pass FHA - “Seller must be willing to make FHA required repairs”.  You may also decide to have this conversation verbally with the listing agent at time of offer to see what FHA items you both think may arise.

• USDA loans These are typically 100% financing and the buyer will actually get his/her deposit back - “Deposit to be returned to buyer at close”

• Subject to Obtaining Grant Money- The buyer’s ability to close will be contingent on obtaining a grant in the amount of $__________ from (Insert organization, town or government).

• Subject to Appraisal  - In certain instances (ie buyer is putting 20% or more down or is paying cash), if you are concerned about the property appraising you might want to put “Subject to property appraising at or above purchase price”  Please note that for most loans if the property doesn’t appraise your buyer will not be able to get the loan and therefore you can backout for failure to obtain mortgage.  However, the other side could argue that even though the property didn’t appraise the buyer could still move forward by putting more money down if they have more money to put down.

• Not Subject to Appraisal - Regardless of appraisal value, the Buyers agree to pay the full price offered of $ x and agree to come to their closing with any difference in appraised value up to x . 

• Buyer willing to pay appraisal gap - "In the event that the property does not appraise at offer price, the buyer will pay $X over the appraised value not to exceed the purchase price of $X. If the difference is more than $X, the buyer may enter negotiations with the seller to amend the sales price or may terminate the contract by giving written notice to the seller's agent or attorney and the deposit will be returned to the buyer."

• Non refundable deposit - Buyer agrees to pay a non-refundable deposit of XXX to Seller upon signing this agreement. The non-refundable deposit shall be applied towards the purchase price of the property upon successful completion of the transaction. In the event that the Buyer fails to complete the purchase for any reason, the non-refundable deposit shall be retained by the Seller as liquidated damages and not as a penalty.

• Cash Offers - If you are concerned about the property appraising you might want to put “Subject to property appraising at or above purchase price”. Remember that appraisals are required when the buyer is getting a loan, but they are not if buyer is paying cash.  The buyer needs to choose if he/she would still like to have an appraisal done and if the appraised value will be a contingency of the offer.

• New Construction which has not been completed -   “Subject to review and acceptance of all aspects of the builder’s specifications sheet by both parties”

• Escalation Clause - We suggest using the following standard line on the additional provisions line of the offer if you want to make sure it gets presented. “Buyer will increase their offer by $1,000 over next best NET offer, with a max purchase price of X, with proof of competitive offer.”  

  • You can also consider writing in an escalation with no cap.  Buyer will increase their offer by $1,000 over the next best NET offer, with proof of competitive offer. Buyer will have 1 hour from time of notification of a higher bona fide offer to accept or reject the new purchase price and if accepted, will immediately submit a revised offer.”

• Single Family home with Tenants - See the clause below under multi family clauses.

• Pools - Need to make sure pool and all equipment will remain:

• Above ground - “Pool and all equipment to remain for buyer's enjoyment.”

  • In ground - “All pool equipment to remain for buyer's enjoyment.”

• Lead Disclosure - When the selling agent has not provided a lead paint disclosure but you need to get the offer in "Contingent on the seller providing the lead paint notification to the buyer to review and accept"  The lead paint disclosure MUST be singed and dated the same as the original offer so this will require you to get a wet signature 

• Lease back - If the sellers will need extra time in the property your buyer may choose to lease back the property back to the seller after closing - ""Buyer is willing to lease said property back to the seller for xx amount of time for xx amount of dollars"  - Contact your attorney for guidance on this one , the attorney will make it more specific in the P and S 

• Hold back -  If you need to hold back funds due to lets say repairs you will need to have the attorney write the addendum  or at least advise you on the verbiage

• TERMITE INSPECTION: The BUYER shall have the right to obtain, at the BUYERS expense, a termite certificate from a licensed exterminator stating that the buildings on the property are free from termites and other wood-boring insects and any damage caused thereby. If said inspection reveals such infestation or damage cause thereby, which requires repair, the SELLER shall undertake said extermination or repairs, provided however, that if the cost of said extermination and/or repair exceeds $1000.00, the SELLER have have the option of canceling or fulfilling this agreement. If given said option the SELLER shall desire to cancel this agreement, the BUYER may pay all amounts in excess of $1000.00 and SELLER shall be bound to perform this agreement paying the first $1000.00 of said extermination and/or repair. 

For Sale By Owner: FSBO

Compensation - When offering on a FSBO you will need to write your compensation int the offer " Seller agrees to pay a commission to ROVI Homes in the amount of x % of net sale price at closing."

Escrow - You will need to verify who is going to hold escrow. Will it be the Seller's attorney or ROVI Homes

Lead Paint - If the property was built prior to 1978 you will need to supply the seller with a copy of the lead paint packet and disclosure. You should recommend them reviewing it with their attorney prior to  filling out as we can not help them with that. 

Multi Family Clauses

• Tenants staying or going?  - You should put in writing if your buyer wants the tenants to remain or not.  Be specific about each unit.  Please keep in mind that asking a seller to have the tenants removed in most cases will weaken your offer. Ie “First floor tenants to remain, second floor unit to be free of all tenants prior to close.” Typically if you are going to ask for tenants to be removed prior to close, the landlord will not want to give this notice to the tenants until you are through inspections and have your mortgage commitment.  This will extend your closing an extra 45-60 days in some instances. If you are going to do this check with the lender on viability and rate locks.

In the event that the Seller cannot deliver the Property vacant of tenant by [Insert Date 1], the Purchase Price shall be reduced to $[Reduced Price 1]. Should the Seller fail to deliver the Property vacant of tenant by [Insert Date 2] (30 days after Date 1), the Purchase Price shall be further reduced to $[Reduced Price 2]. If the Property is still not vacant by [Insert Date 3] (30 days after Date 2), the Purchase Price shall be further reduced to $[Reduced Price 3]. Each reduction in the Purchase Price shall be effective immediately upon the passing of the respective deadlines.

• Who owns the appliances? - Make sure the buyer is clear on which appliances the landlord owns and which the tenant owns which may be removed if the tenant is removed.  Ask for the landlord owned appliances to remain and call them out.  Ie “first floor refrigerator and stove to remain, second floor fridge to remain.”

• Lease/tenant Review - Make your offer “subject to review and acceptance of current leases, escrow accounts, rent rolls and any other relevant tenant documentation”

• Verify the number of units that are recognized by the city/town.  This doesn’t necessarily need to go in the offer, but the BUYER (not the agent) should do their due diligence during the inspection period.  The buyer should check with BOTH the assessor's office and the building department in town to make sure that all advertised units are legal recognized units by BOTH departments.  Just because public record says its a 3 family does not mean the town/city departments all recognize that its a 3 family.   Springfield is particularly notorious for having buildings that look like three families (ie all 3 units have separate electric, separate gas and two separate means of egress but the third floor is actually not recognized and therefore cannot be rented out even though it might currently be rented out )

Condo

• Document Review - You should request the following documents from the other agent and then add the following to the offer “subject to review and acceptance of condo documents, rules  and regs, By-Laws, financials and meeting minutes by (X date) .”  For meeting minutes request copies of last two meetings.  This will give your buyer information about any pending assessments that might be being discussed. Make sure to put a time link on this.. Inspection / appraisal/ commitment ( keep in mind the shorter the contingency the stronger the offer) 

• Make sure the complex is FHA/VA Approved.  You can check THIS “guide to buying and listing condos “ for additional things to consider

Mobile Home

• The first thing to keep in mind is that a mobile home is not “real property” so a signed offer/purchase and sale are not required.  You will just need a bill of sale.

• Be careful using the standard offer to purchase because it refers to real property.

Land

• Land is a very unique purchase so we created THIS document which the buyer should review prior to expiration of the due diligence period.  There are numerous things that you may need to add to the offer that are outlined in that document.

• Viability of construction plans - A standard provision for buyers looking to build a primary residence on the land they are building would be “Subject to review and acceptance of buyer’s current building plans and land use with all town departments”

When you are representing the Seller make sure these clauses are included when applicable

• Subject to the seller finding and closing on suitable housing.  Please note that you should make sure this language is in the offer and purchase and sale even if the seller is under agreement for suitable housing because that suitable housing transaction could fall apart.

• Subject to probate approval

• Subject to 3rd party approval or subject to short sale approval

• In Highest and Best situation  add " Seller reserves the right to accept an offer at any time "