Seven Answers You Need Before Signing a Real Estate Contract

Caveat: If not in Georgia, double-check with an expert in your state

[1] How will this fit your budget. Measure twice, cut once. That’s good advice for lumber and even better in this case. In our current market once you close on a home, you’ve just lost money. You’ll need time and energy and improvement/maintenance capital to get you out of the hole you just stepped into. Make very sure your first step is not toward financial danger.

A few years ago, in a rising market, this didn’t mater so much. Now a real estate purchase has more risky than publicly acknowledged. If you don’t have 3 months of payments squirreled away after closing then you are asking for trouble.

As for income, your mortgage payment with taxes and fees should be less than 1/3 of your monthly gross income. With the current rates stick with fixed 30 year loans. We’ve got enough foreclosures to deal with without adding yours.

[2] Property condition; get a proper Inspection Report. Running generally from $250 to $550 a good home inspection is mandatory. Don’t hire a buddy of your agent, but ask around. Ask people that you consider smart and successful. They’ll have some names, both good and bad. Do a little homework here and get the best person. If you find no problems you’ll be the first.

Surveys are not generally required like they used to be and few people around here ever get one. The issue is that a survey problem is far more expensive to fix than any physical problem with a house. New HVAC system or roof looks cheap compared to not being able to add the addition you’re planning, or moving your garage when a neighbor sues you. Get a survey once, and any problems get negotiated into the deal upfront, while it’s the seller’s problem!

[3] Value. Have your agent run a CMA, (Comparative Market Analysis), for you on the property BEFORE any offers are written. You can do your own in some areas from the public tax records and you may get an agent that can run a report form multiple systems. Gather all you can and get accurate. If you can drive buy the comps you’ll get the best feel. Online services giving property values are simply too inaccurate for use. Avoid the widely varying website ‘values’. Make your offer contingent on the lender’s appraisal. Back this up by getting your appraisal fast. A good lender can get this done in a week.

[4] Floor Plan – Will it Fit? You have furniture, stuff, hobbies, car[s], and family and friends. Is the place going to ‘fit’? Will Granny’s armoire make the turn in the staircase? I’ve see people hire a contractor to remove double windows, hire a crane, and hoist a big piece into the bedroom. They really wanted that one.

[5] What’s the area demand? How many sales of similar properties have there been in the last 12 months? How many are currently listed for sale? If 9 are listed and 4 have sold, including yours, then you better be the best of the bunch if you plan to sell. Start improving your home right away and keep improving every year. Don’t get crazy, and don’t get too colorful. Keep to the popular finishes and colors you see going into new construction. You’ll love it and someone else will really want to live there too.

[6] Timing. When can you move in? Is it vacant? If no, when can they move out? How does the availability of a ready property, a closed loan, utilities, and movers, all fit into your schedule? The physical move is a stressful experience and will be worse than your mental picture. Be prepared and get flexible. My friends’ move in MS last weekend was cancelled due to a hurricane’s arrival on moving day. Have a plan-B, even if its tarps and sleeping bags.

[7] The Back Door. Once you sign on the dotted line you are ‘on the hook’, but what if you want to back out? How deep is that hook going to be set? You want a period of time in which you have the right to terminate the agreement without penalty. Even the heartless foreclosure banks and lawyers are giving some time these days but it can be short. I see 3 as a min and 21 as the max. During this time frame you get to inspect and satisfy yourself in every way that your want to move forward. Get cracking immediately. Know exactly when the clock starts and when it ends. Move! Building inspectors, contractors, HVAC techs, termite inspection, survey, engineers, appraisers, neighbors background checks, inspect the closest grocery store, the playground, the church the dry cleaners, the school, the driveway the sunrise/sunset, the traffic pattern, the whole list. Tick Tock…

It’s time. You’re either in or out. Put-up, or Shut-up. Chances are that you’ve made it this far and will be moving into your great new home very soon. Or, you’ve killed the deal, and are ready to start again, from the top. Better to handle it now. I’ll start the car.

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