Q. What is a purchase and sales agreement?

A purchase and sales agreement is a contract to buy and sell real estate. The agreement should contain the terms and conditions of the deal (i.e. buyer, seller and property information, sales price, closing date, deposit information, mortgage contingencies, property inspection, etc.).

Q. Do I need a real estate attorney to review the purchase and sales agreement before I sign it?

Often a standard Realtor’s purchase and sales agreement is used for the conveyance of residential properties in Rhode Island. These agreements are well written and balanced for all parties. Most purchase and sales agreement are packed with important dates, terms, and conditions, which require the attention of both parties. It is important to have a real estate attorney review the agreement prior to signing it.

Q. What steps must the buyer take prior to the real estate closing?

There are many issues that need to be addressed by both parties prior to the closing. The buyer must: apply for a mortgage; notify the seller if the buyer cannot obtain a mortgage; conduct the agreed upon inspections; notify the seller of any material deficiencies discovered by the inspections; choose an attorney for the closing; obtain insurance; contact the electric and gas company(s) contact other service providers (i.e. telephone, cable, etc.); and inspect the property prior to the closing.

Q. Does a buyer of real estate need a survey of the real estate?

The buyer of real estate in Rhode Island is not required to survey the property before the closing. However, our office always recommends that a buyer of real estate have the property surveyed and purchase the necessary title insurance endorsement to cover any errors with the survey.

Q. What information will my real estate attorney need to prepare for the closing?

The following information should be forwarded to the closing attorney by the buyer as soon as the purchase and sales agreement is signed: purchase and sales agreement; seller’s disclosures; seller’s and seller’s attorney’s information, buyer’s and realtor(s) information including address and telephone numbers; and other relative information. The buyer should immediately provide the closing attorney’s contact information to the lender.

Q. What will my closing attorney do before the real estate closing?

Your closing attorney will have to obtain a municipal lien certificate (MLC); conduct a title search; review the title search and recorded maps; draft a title commitment; obtain a title closing protection letter; prepare lender required information (i.e. wiring instructions, etc.); obtain the final water and sewer bills; prepare the HUD; prepare and review closing documents; review the loan documents; and other pre-closing tasks.

Q. What steps must the seller take prior to the real estate closing?

The seller of real estate is responsible to maintain insurance coverage until after the closing; maintain the home as described in the purchase and sales agreement; obtain a smoke detector certificate; provide the buyer with a water meter reading; allow the buyer access to the property for home inspections; provide proof of compliance with RIGL 44-30-71.3 either by a seller’s residency affidavit (Rhode Island resident seller) or by a certificate of no taxes due (non Rhode Island resident seller) or the closing attorney must withhold 6% of the total sale amount at the time of the closing; prepare the deed to convey the real estate to the buyer; obtain and forward to the closing attorney an invoice from the seller’s attorney; obtain and forward to the closing attorney a commission statement from any involved realtors; and other related tasks.

Q. What is a real estate closing? What will occur at the closing?

The real estate closing is a final gathering of all of the parties involved in the real estate transaction (i.e. the Buyer, Seller, and Lender). Attorneys for the parties will meet with the parties to sign and officially transfer title to the buyer. The closing attorney will facilitate the transfer of title and is responsible for recording the new deed. Rhode Island buyers of residential real estate have the right (in accordance with state law) to choose the closing or title attorney.

Q. What should the buyer do immediately prior to the closing?

Before arriving at the closing, the buyer should walk the property to assure that everything is in the agreed upon condition. The buyer should also have all the necessary paperwork and certified checks for the seller and for various closing costs.

Q. What does my real estate closing attorney do after the real estate closing?

There are a number of post closing issues including the following: updating of the title; recording of the deed, mortgage, and other related documents; payment of city taxes, water, sewer, tax stamps and recording fees; payoff of any existing mortgages; other payments (i.e. seller’s attorney, realtor commissions, title insurance, etc.); disbursement of funds to the seller; and generating the title insurance.

A lot goes into a successful real estate purchase or sale: knowing a given geographic area, analyzing past sales data, using effective and efficient methods of marketing, and, of course, knowing how to negotiate. My partner and I have been involved in nearly $500 million of successful real estate negotiations. Here are the things our experience shows contribute the most to successful real estate negotiations:

1. The Golden Rule – We all know this one, right? “Do unto others as you would have them do unto you.” Sadly, in today’s contentious, litigious society, we see many people enter into negotiations with the often misguided belief that negotiations have to be a negative, confrontational experience. Our experience shows that people seem to get more of what they want when they use the exact opposite approach. When you show yourselves to be reasonable and objective, people are often so pleasantly surprised that they bend over backwards to “meet you halfway” and often end up meeting you MORE than halfway!

2. The Other Guy Does Not Have to be Your Enemy – This is similar to the prior item, but a little different. We know that it may sound cliché or trite, but our objective in every transaction that we do is for it be a “win-win” situation for all parties involved. How can you take pleasure in an activity when you know the other side is miserable? Toward that goal, there is absolutely no reason that everyone cannot be on positive terms during the course of a real estate transaction. We are occasionally disappointed when we encounter people – buyers, sellers, other realtors, sometimes even our own clients – that have a mentality that “the other guy is trying to screw me.” Often times, this mentality is a self-fulfilling prophecy.

3. Ethics are Everything – No explanation needed here. If people don’t trust you, you’re done. Once trust leaves any relationship, whether it’s in real estate deal or anywhere else, for that matter, you are left with nothing. Never, ever, misrepresent ANYTHING in a real estate transaction. Particularly when it comes to disclosing things about your home as a seller. If you hide a defect, assume it will be discovered when your home is inspected. And then assume, when that defect is discovered, that the purchaser will come back and want to re-negotiate a lower price. We see this over and over. Disclose it upfront, and it’s never an issue.

4. Never Reopen a Closed Issue/Raise an Issue at an Inappropriate Time – Very often, there are multiple issues to be negotiated in a real estate transaction (e.g., price, closing date, possession and occupancy, items to be included, various deadlines, etc.). In most typical transactions, the parties methodically work through the issues and eventually end up with an overall agreement. One thing that almost always upsets people is reopening an issue that was previously agreed to, or raising an issue that was thought to have not been an issue. As the old adage goes, “measure twice, cut once.” This absolutely applies to real estate negotiations.

5. Avoid “Lowball Offers” – Do lowball offers work? Yes, sometimes, but the reality is that, a very high percentage of the time, they fail miserably. Why? Because they offend people. We have seen his many, many times. As much as we try to make our clients view real estate as “business,” the reality is that most people have a hard time doing this. Homes tend to take on a very personal significance to their owners. Most people expect to negotiate some on price. But when you start the process at an insultingly low level, our experience shows that the seller will INCREASE their “bottom line” as a knee-jerk reaction to the low offer. And when we try to tell sellers not to do this, the typical response is, “I would have sold my home for $400,000, but I will not sell it at that price to these jerks. I want $415,000 if I’m going to sell to them.” Is this logical? No. Is it common? Absolutely.

6. Never React Negatively to a “Lowball Offer” – Viewing the prior point from the other side, it’s our belief that you should never “throw out the baby with the bathwater.” Sometimes, buyers just need to prove to themselves that they got the best deal they possibly could. Some cultures almost REQUIRE this approach. Many times, all they need to do is see that you are going to stand your ground. At that point, they often accept reality and increase their offer to something more realistic. You’ll never know if you react angrily and refuse to play the game to find out. So, hold your tongue and play along – it just might work out after all.

Most of these tips are common sense, but you would be surprised how often we encounter people that naturally want to do the opposite of everything written above. Incorporate these tips into your next real estate purchase or sale and we think you’ll find that negotiating can actually be a pleasant and pleasurable experience. For a more detailed discussion of this topic, please see the Professional One website. Good luck!