Buying or Selling a Home/Negotiating a contract
Thank you very much for volunteering on this site! You have some very impressive credentials! I am not sure what are of Southeast you live and work but hope that should not make any difference. I only have a few questions. Background: We are selling a house in Louisiana as a FSBO. (We are doing FSBO mostly due to major financial challenges we are about to face).
We have paid an agent $400 to give our home an MLS number for 6 months. As part of the listing, we have agreed to compensate a buyer’s agent some amount. And sure enough, whenever we are contacted by an agent, one of the first things they wish to reconfirm, is if we are indeed willing to pay them a (usually specified amount of) commission.
We just recently received an offer from an agent. (She has the same last name as the buyer and we learned, she is the ex-wife of the buyer).
In conversations with the agent there has not been any mention of compensation for her, nor is there anything in the contract. We are a bit puzzled about this. If it is not in the contract, would she have any legal basis for asking us for anything later?
The offer stipulated – among other things – the following: the buyer wants to rent my house from June 1 till September 1 and then buying it. Buyer doesn’t have a house to sell but we learned he is the Air National Guard and will deploy sometimes in September. (We wonder if maybe the increased pay then is factored in and is the reason, or if he doesn’t want to break his apt lease).
Should I be concerned about the terms of this contract?
How could I make sure the buyer will be able to buy after two months of already living in my house?
What should I put in the contract to protect my interest?
I am thinking about proposing a rental agreement for $40/day – starting on 1 June - until the closing.
But while hoping for the best, would like to prepare for the worst and would like to also propose them an agreement that would state that if by 1 September the buyer cannot buy the home then the agreement will convert to a conventional rental of $1900/month w/ a $5000 security deposit?
Also, should I be concerned that the buyer's agent – as of yet - has not asked for any compensation from me? Could this come up later if it is not in the contract?
Once again, thank you VERY MUCH in advance.
Sorry for the delay in responding. Holiday weekends are always busy for me.
Assuming the agent who showed your home and wrote the offer did so based on information obtained in the MLS database, the legal basis for asking for commission is your listing as showing in the MLS system. If your listing, however, does not state a specific amount of commission that will be paid, only that “some amount” will be paid, a selling agent should ask “what” amount you will pay and address that issue now. I, personally, would ask for something in writing; but the offer on your house is NOT the document that should properly address this: It should be a separate commission agreement.
To be fair to the agent who might have a buyer who can close on your property, I would address this NOW. Tell her what you will agree to pay AT CLOSING (no part to be paid in advance of closing), and draw up a simple agreement stating the terms of your agreement. This way, you will avoid problems down the road.
My comments/questions on wanting to rent from June 1 till September 1 based on your comments:
1. Is this a single man or does he have a family that will occupy the home after he is deployed? If he does not have a family, why would he want to rent and then purchase at the time he is deployed?
2. You need to have a separate rental agreement drawn up spelling out all the terms you agree to, such as:
A. Who pays utilities
B. Security deposit/damages amount (if you want to require one in addition to the $5,000.00 amount that would be forfeited to you in the event of a non-closing on part of the Purchaser).
C. Take pictures before any tenant’s move-in so that you can document any damages later if necessary.
D. What happens if your Tenant does not close? How long will you agree to lease to them?
I could go on and on, but I would suggest having an attorney draw up a sale agreement and a lease for you. Require the Purchaser to pay the cost of the rental agreement.
My biggest concern would be that you get closer to closing and find that your buyer cannot close because of credit issues. Address this NOW, and ask for the $5,000.00 security deposit NOW (or whatever amount you agree to).
Require a PRE-APPROVAL (not pre-qualification) letter up front from the lender who will make the loan. I would insist that the lender have already pulled credit information and state same in the pre-approval letter and not provide just a “lip service” pre-approval letter.
Because you would be taking your home off the market in the PEAK selling season, I would include language that if for ANY reason (NO exceptions), closing does not occur on the part of the Purchaser on the date you both agree on, that the earnest money becomes NON-REFUNDABLE to Purchaser at that point and will be forfeited to Seller. (It would also be good for you to know “who” will be holding the earnest money.)
If the Purchaser is qualified, and serious about purchasing your home, there should be no hesitation on his part to agree to the above language. I use it all the time in special circumstances.
Rather than giving a reduced amount of rent up front, I would stick with your $1,900.00 monthly amount if you feel this is a reasonable amount for your home. If you want, you could agree to “apply” the difference in the $1,900.00 and the $40 daily rate or approximately $1,200.00 monthly amount to their closing costs, ONLY in the event of a closing. This would be, say, $700 a month – and more incentive for the Purchaser to close on your property. In the event of a non-closing, NO portion of the $700.00 difference would revert to Purchaser, but would be retained by you.
You are VERY wise by saying that you are hoping for the best, but would like to prepare for the worst. This is the way offers should always be written. It’s the “what-if” that always creates problems.
Good luck to you, and I hope the above is helpful to you.