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How to write a perfect home purchase
You've spent weeks, perhaps
months, searching for the ideal
home to buy. You finally found it
Now the fun of negotiating for its.
purchase begins,
Often the real estate agent will
drag out1 a "standard purchase
contract* from his or her briefcase. Ask who wrote the printed
contract. If it was prepared by the
Realtor's association, you can be
sure it primarily
protects the realty agents. :
The form you are presented by
the realty agent may be the misnamed "short form" of a just a;
few pages. Or it might be the
"long form*' used in some states,
consisting of eight or more fineprint pages. In a few states, a
•bomb purchase .contract can only
be prepared by an attorney.
Although state law may.require a few clauses in home purchase offers, buyers and 'sellers
are free to .negotiate additional
provisions. Here are the essentials
to include in the perfect home purchase offer:
(I) IDENTIFY THE PROPERTY, THE PARTIES AND THE
PRICE. Real estate purchase contracts usually first identify the
property being sold, the name(s)
of the buyer(s), the price offered
and the amount of your good faith
earnest money deposit.
If your offer price is substantially below the asking price, a
large earnest money deposit
check accompanying your offer
may impress the seller into accepting your low offer. Or, you
may want to make a low deposit,
such as $1,000, to be increased
upon removal of the contingencies.
Be sure the property is correctly described, such as by street ad-
dress, parcel number, legal description, or other method so
there is no misunderstanding.
This is especially important when
buying rural properties.
(2) INCLUDE A .FINANCE
CONTINGENCY CLAUSE. Unless
you are paying 100 percent cash
for the property, your ideal purchase offer should include a mortgage finance contingency clause.
.Hopefully, you have obtained
mortgage pre-approval from a
lender. But your offer should contain a finance contingency clause
just in case the home doesn't appraise for the price you offered. If
you can't get the finance terms
specified, then. you can cancel
your purchase offer and get your
deposit refunded.
For example, your offer might
specify: "This purchase offer is
contingent upon buyer and property qualifying for a new 90-year
first mortgage of at least $100,000
at a fixed interest rate not exceeding 8.5 percent with a loan fee not
more than two points and a
monthly payment of $768.91."
(3) INSIST ON INSPECTION
CONTINGENCY CLAUSES. Most
home buyers today insist on a Contingency for a professional home
inspection. Be sure to accompany
the inspector, who should be able
to explain Che seriousness and cost
of repairing any defects discovered which the seller did not previously disclose.
Depending on local customs,
you may want to also make your
offer contingent upon your approval of additional inspections
for termites, pest control, energy
efficiency, radon, plumbing, electrical, and the roof. Be sure the
purchase offer specifies if the seller is to pay for any necessary repairs. Usually, the seller will insist on a dollar limit for such repairs.
(i) WATCH OUT FOR AN "AS
IS" CLAUSE. Many sellers offer
their homes for sale "as is." Although .home sellers must disclose
known defects, an "as is" sale
means the seller won't pay for any
repairs,
When a seller advertises the
house "as is/* that usually means
it is in poor condition. "Buyer beware*' should be your motto when
buying an "as is** house which
needs an extra-thorough inspection.
(5) ITEMIZE PERSONAL
PROPERTY YOU WANT INCLUDED. A home real estate sale
does not include any personal
property, such as furniture, appliances and window coverings. If
you want some of these Hems included in the sales price, be sure
to itemize them in your purchase
offer even if the listing information says they are included.
(6) BEWARE OF AN ARBITRATION CLAUSE. Many preprinted real estate purchase contracts include an arbitration
clause for any disputes which may
arise. If you agree to this clause,
please be aware you give up your
legal rights to a jury trial and the
dispute will be decided by an arbitrator rather than a judge.
Arbitration rules are far different from court .rules. Generally,
there is no appeal if you disagree
with the arbitrator's decision,
even if it is contrary to statutes or
legal precedents.
(7) BE PREPARED FOR A
COUNTEROFFER.
Although
your home purchase offer may be
accepted by the seller without any
changes, sellers often find the
terms offered are not acceptable.
A sharp real estate agent then
asks the seller to make a written
counteroffer to the buyer.
When the seller makes a counteroffer changing even . the
slightest term, the original offer is
rejected and cannot be later accepted. Before a sale results,
many counteroffers often go back
and forth between the buyer and
seller. This is a normal part of .the
fun of buying a home.
A FINAL WORD. In addition to
the typical home purchase offer
terms discussed above, the purchase offer you are presented by
the realty agent will contain other
provisions. Before signing, be
sure to study the agreement carefully. If you don't understand it,
ask your attorney to review it before you sign.
Never make a home purchase
offer unless you are certain you
want to own that residence. Some
home buyers incorrectly think
they can get out of their purchase
offer if they change their minds.
That can be a very expensive mistake. Although home buying may
seem complicated, thousands of
buyers enjoyably purchase homes
every day. With the help of a good
real estate agent, your home purchase offer can lead to a successful acquisition.
Mortgage interest tax break faces uncertain future
By Stare Brown
Dallas Morning News
With congressional budget cutters scrutinizing everything from
Big Bird to Medicare, you can't
fault home builders and real estate agents for worrying about the
future of the home mortgage deduction.
Housing industry supporters
admit that the threat of a new cap
or total elimination of the most
popular federal tax deduction isn't
immediate. They are nevertheless
concerned about how far federal
lawmakers might go to trim costs.
"And if they ever enacted balanced-budget legislation, all bets
will be off/' said Bruce Hahn,
president of the American Home
Owners Foundation, based in
Washington, D.C. "I don't think
you can gel (o the balanced budget without some significant tax increases, and they would have to
go after sacred cows at that
point."
Any cut in homeownership deductions will bite deeply into
Americans pockelbooks.
More than 27 million taxpayers
take advantage of mortgage and
home property tax deductions,
which add up to more than $50 billion a year in tax savings.
For many taxpayers, owning a
home is the best way to significantly lower their income tax
bills. The average mortgage interest deduction was about $7,300 in
1992, the most recent year for
which figures are available.
Taxpayers can now deduct annual interest payments on mortgages up to $1 million in value. A
new ruling also allows home buyers to deduct prepaid interest, or
"points."
Although even the most fervent
housing supporters don't suggest
that Americans would all switch
to renting if the mortgage deduction gets axed, recent surveys
support their claims about these
write-offs.
Tax benefits are one of the
chief reasons people say they own
homes, the National Association
of Home Builders found in a 1994
poll of homeowners and buyers.
Almost half of Americans sur-
8D~ News-Press • Sunday, May 21,1995
veyed said they will change their
home-buying plans if homeownership tax deductions are eliminated.
"Home builders feel very
strongly about this/' said Gopal
Ahluwalia, a researcher with the
builders association, based in
Washington, D.C. "Eighty percent
feel that if the mortgage interest
deduction was eliminated, they
would lose business."
The potential effect on the
economy is great. Each year,
builders sell almost 1 million single-family homes with an average
price of more than $120,000. Home
buyers purchase about 3 million
or so existing homes each year.
Given the pressure from homeowners, builders and real estate
agents, how likely is Congress to
take on a reduction in mortgage
interest deductions?
"The short-term outlook for repeal - thank God - is dim, said
Hahn, whose homeowners group
lobbies lawmakers. "But there is
a strong push in Washington for
budget austerity. I don't think you
should take anything for granted."
Housing interest group leaders
say the mortgage interest deduction already has fallen off the list
of untouchable benefits.
"Senior members of Congress
are on record that the mortgage
interest deduction is not sacred,"
sato Stephen Driesler, vice president and chief lobbyist for the National Association of Realtors,
Driesler said some congressional leaders, including Senate
Finance Committee Chairman
Robert Packwood, ROre., have
suggested reducing mortgage tax
deductions to help pay for a proposed capital gains tax cut.
Lawmakers who are pushing
flat tax proposals also would eliminate homeowners write-offs,
Driesler said.
Congi-ess overall attitude toward the housing industry suggests continued attempts to cut
expenditures, he said.
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