section 13 unit 3: Purchase Agreement Negotiations

In some situations, sellers may ask buyers to waive the inspection contingency when they make their offers so the sellers don't have to sit with their house off the market for weeks while the inspection period runs out, stressing about whether the deal will fall apart. If the buyer agrees, what would be the order of these actions?

1st: Buyer pays for inspection 2nd: Buyer makes an offer in writing 3rd: Seller evaluates and accepts offer

When a sales contract doesn't cover the terms needed by the parties, which of the following actions is a licensee allowed to take? a. Add a standard addendum using standard language. b. Draft an amendment using whatever language is needed to capture the missing terms. c. Hire an attorney and invoice the client. d. Terminate the contract on the client's behalf.

a. Add a standard addendum using standard language.

As Clarke's mentor, you're listening in on a conversation between Clarke and his first-time homebuyer clients. You hear Clarke say, "I can't write an offer for less than asking price because this house is priced to sell. Don't make the offer contingent on an inspection. I've looked at the house, and there's nothing wrong with it that you can't fix after you close. Make sure to write a large earnest money check to show you're serious." What three things are true about this conversation? a. Clarke should involve the buyers in these decisions, not make the decisions for them. b. Clarke shouldn't recommend eliminating the inspection contingency. c. Clarke's shouldn't make any recommendations on what purchase price to offer, regardless of his knowledge of the market. d. Clarke overstepped his knowledge in representing that there's nothing wrong with the house.

a. Clarke should involve the buyers in these decisions, not make the decisions for them. b. Clarke shouldn't recommend eliminating the inspection contingency. d. Clarke overstepped his knowledge in representing that there's nothing wrong with the house. Clarke can make general recommendations on offer prices as they relate to market conditions in order to educate his clients, but ultimately, the decision is absolutely up to the buyers.

Haley is a young professional buying her first house. Although she can afford the full listing price of the home she is making an offer on, you have advised her to offer 10% below the list price, because the market is ______. a. cold b. heating up c. hot d. neutral

a. cold

In what type of market is pricing a home below market value an especially good strategy, as buyers are scarce and unlikely to consider at or above-market homes? a. cold market b. hot market c. neutral market d. warm market

a. cold market

After completing the agreement of sale, you recommend to the buyer that she review the contract with an attorney before signing it. a. do b. dont

a. do

Start with a new, clean offer form every time you write an offer for a client. a. do b. dont

a. do

With your buyer's input, you fill in all the blanks that apply to this specific transaction and check all the necessary boxes. a. do b. dont

a. do

You confer with your client as to how the agreement should be structured, and the appropriate price to offer based on the comparables research you've done. a. do b. dont

a. do

You cover the options for contract terms and any contingencies for your client as you complete the form. a. do b. dont

a. do

Offer at list or slightly below list price a. neutral market b. hot market c. cold market

a. neutral market

Offer standard terms a. neutral market b. hot market c. cold market

a. neutral market

Be sure that your clients understand the impact of any contingency written into the contract, especially with respect to contingency deadlines. a. true b. false

a. true

Waive appraisal (this is not an option if the buyer requires financing)

appraisal worries

Your clients, Rob and Rachel, made an offer on a property that the seller rejected. They're ready to make an offer on a second property. What should you do? a. Open the original offer in your computer system and edit it to match the terms of the new offer. b. Open a new offer form in your computer system and complete it using the information for the new offer.

b. Open a new offer form in your computer system and complete it using the information for the new offer. While it may seem easier to edit the existing offer, it's easy to make mistakes that could cost your client.

As you're going through the sales agreement, the buyer asks you to scratch through and revise some of the wording. a. do b. dont

b. dont

Encourage buyers to eliminate the inspection and financing contingencies to make their offers more appealing to sellers. a. true b. false

b. false

Encourage buyers to write as many contingencies into the purchase contract as possible to give them adequate negotiating leverage. a. true b. false

b. false

Offer seller-favorable terms a. neutral market b. hot market c. cold market

b. hot market

Put your best offer forward a. neutral market b. hot market c. cold market

b. hot market

Jon and Roberta Schremer stopped in the office while you were on floor duty. They're ready to sell their home and are looking for a licensee to help them. You take them to your desk, and Jon begins to tell you their situation, including why they're selling. It's never too early to start setting yourself up for success, and there are some things you can do up front to avoid problems with the purchase agreement later in the transaction. What should you do first? a. Offer them something to drink. b. Produce the listing agreement form and begin to complete it. c. Discuss the types of agency relationships offered by your firm and complete and agency disclosure form. d. Complete the lead-based paint disclosure form and have your sellers sign it.

c. Discuss the types of agency relationships offered by your firm and complete and agency disclosure form. Before you allow either Jon or Roberta to share confidential information, you should discuss the agency relationship with them and get a signed agency disclosure.

In a neutral market, what pricing strategy may generate interest in the property, possibly prompting multiple offers? a. pricing above market value b. pricing at market value c. Pricing below market value d. Pricing in line with comparable properties

c. Pricing below market value

Dani is in love with the ranch-style home on Cardinal Avenue, says she simply must have it, and is willing to pay cash. The seller is concerned about an appraisal. Which of the following would be a good strategy for structuring her offer? a. Include an escalation clause. b. offer a quick close c. Waive the appraisal. d. waive the inspection

c. Waive the appraisal.

Ask the seller to pay closing costs a. neutral market b. hot market c. cold market

c. cold market

Go low, at least 10% below list price a. neutral market b. hot market c. cold market

c. cold market

An expedited close (provided the lender can meet the deadline)

close quickly

After meeting with her sellers, the Kowalskis and evaluating the market, Alison has come up with a strategy, and she doesn't think the Kowalskis will be thrilled to hear it. She thinks the best way to generate interest, given the number of similar properties on the market, is to price just below market value, and even then, not to expect a bidding war or multiple offers. In fact, the Kowalskis may need to be prepared for an offer that's even lower than the recommended list price. There's nothing wrong with the property; it's just the nature of this market. Which type of market is this?

cold market It can be tough for sellers to hear that their property may need to be priced lower than market value to sell and even tougher to hear that they probably won't get an offer at that lower price. This reality check may cause some sellers to wait until the market heats up a bit before selling, if they can.

Lena's buyer Mindy is making an offer on Leo's house. Which party decides how much earnest money to offer? a. lena b. Leo c. Leo's agent d. Mindy

d. Mindy

What's an effective pricing strategy when listing a home in a cold market? a. price the home above market value b. Price the home above market value and decrease the price after a month if it doesn't sell. c. price the home at exact market value d. Price the home below market value.

d. Price the home below market value.

Reggie has thoroughly reviewed the sales contract with his clients, the Arnolds, and has confirmed that they understand all of the terms and provisions. What should Reggie do next? a. Ask the Arnolds if he can provide them with any legal advice about the contract. b. Ask the Arnolds to complete a satisfaction survey and rate their experience with him. c. Make a copy of the contract and send it to the seller's agent. d. Recommend that the Arnolds review the sales contract with an attorney before signing it.

d. Recommend that the Arnolds review the sales contract with an attorney before signing it.

Alison priced Jenna's property just below market rate. Jenna wasn't initially sure about this approach, but Alison explained that she believed others were pricing homes above market rate. At a more-than-fair price, Alison believed a bidding war would ensue and garner a better price than pricing at market value. She was right! Within a week on the market, multiple offers came flooding in. Alison and Jenna then asked all of the buyers to present their highest and best offer. From those, Jenna accepted the best offer and secured another offer as a back-up. This approach worked for Alison, partly because of market conditions. Which type of market was Alison likely working in?

hot market In a hot market, you may have your work cut out for you when you tell clients you want to price their property lower than the house down the block that's not as nice. Some just won't go for it. Market conditions aren't the only factor to consider in your strategy. You really need to have a good read on your sellers and their motivations.

This was a tough market for Alison to predict. After talking with Brody, her seller, and evaluating market conditions, they thought it best to price his property below market value to generate interest and hopefully garner multiple offers. After a few weeks on the market, an offer came in that was $20,000 below list price. Hoping to do a little better, Brody countered at just below list price, and the buyer accepted. Thinking about the reason for pricing below market value and the subsequent response, which type of market was Alison likely working in?

neutral market

Buyer states wish to purchase the property "as-is"

no repairs

Full-price or above full-price offer, with seller to pay some of buyer's closing costs

price

Grace period for seller to move out

transaction ease