Understanding the Agreement of Sale
New Jersey Real Estate Agents have access to attorney-prepared standard contracts. Here are some typical components of a New Jersey residential contract:
- Agreement of sale which includes the Due Diligence period for inspecitons
- Seller’s Property Disclosure Statement
- Condominium Association Fees and Disclosure
- FHA Appraisal Contingency
- Lead-Based Paint Disclosure
In addition to these more common forms, there are lots of additional forms, disclosures, contingencies and special stipulations used to customize each client’s situation.
Part of your real estate agent’s job is to negotiate market value for your home, whether your buying or selling. To come to this valuation, your real estate agent will send you a comparative sales analysis to determine the market value price range of the home you like. This is a report that compares recently sold homes with very similar criteria to the home you want to price. A home’s value can change pretty quickly too. Various factors come into play such as level of competition, interest rates, and inventory, among other things. Having an agent that knows the market well is very important.
When there are more buyers and fewer sellers in the market, the market becomes a sellers’ market.
In a seller’s market, be ready for the contract price to come close to or even above asking price, assuming the home is priced close to its market value. When lots of buyers are searching for a home with very little inventory to chose from, you’ll likely see home prices rise.
When you put in an offer in a seller’s market, you may end up in a “highest and best” offering situation. This is when multiple buyers present the highest and best offer they can give, and want to give, to the seller. My advice to my clients is to present the highest offer, you and your family or just you feel comfortable with. If you lose the house to another buyer, you don’t want to think to yourself: “uhh! if I just offered a little more, I could have gotten my dream home!” If you outbid the other buyers, you don’t want to regret your decision and now think you’ll miss out on enjoying other aspects of life because you overpaid.
There is no single right answer that works for everyone when you enter a highest-and-best offering senario. Your agent can inform you of market conditions and the price range the home is currently worth on the market. There’s a lot more that goes into your decision on what you want to offer. You may decide paying a little over the value is worth it for many reasons such as the need to move quickly, your budget, the time consumption of looking for a home to buy, taking advantage of low-interest rates, etc. Everyone’s motivation for their offer is different. Talk to your agent during your decision process as they will likely be able to surprise you in how helpful they can be. Your agent can help you make the best decision for you.
Before you start going to look at homes, you should know the current market conditions. Discuss this with your agent before you start looking. It’s really important that you are not looking at homes well over budget, thinking that you’ll be able to get a large discount off the purchase price. You’ll break your agents heart when you request to go look at a house, fall in love, and find out you can’t afford it. A good agent will not let that happen. Get that pre-approval letter your agent keeps asking for. This is a huge first step in the home buying process.
After you know what your lender says you can afford, talk to your agent about what you want to pay. They can be two different numbers, the second just can’t be higher! Your lender will tell you the highest mortgage amount you can get, so unless you have a very nice friend or family member to give you money, you can’t buy a home for more than that.
In a sellers’ market, you don’t want to be looking at homes listed above what you can afford. This makes the home buying process significantly more stressful. You don’t want to get caught up in comparing homes you can afford vs dream homes causing unrealistic expectations. Requesting to see homes above your budget in a sellers’ market will cause your agent to decline your showing requests. We are saving you from heartbreak not trying to cause it!
Looking at homes in the price range you can afford will set you up for success, but you may still find the potential of ending up in a “highest and best” bidding war scary and stressful. A few ways to avoid this is by finding a home that has sat on the market for a long time, one that may need some or a lot of work, or the easiest thing to do is offer asking or even above asking. Ask your agent what they predict the situation will be so that you have the right mindset on your offer when you’re viewing the house.
Talk to your real estate agent about current market conditions. Market conditions can also depend on your budget. Usually, the lower the price range you’re looking in, the more buyer competition you’ll see. Don’t expect to get a large discount on a home in this situation.A seller may be willing to agree to a purchase price on the low end because they want to sell quickly, or they may wait for a higher offer because they are in no rush. The opposite could be said for a buyer. In a low inventory market, meaning there’s not a lot of homes for sale, a buyer may decide to pay on the higher end to get into a home quicker.
Buying a home is a very emotional, stressful life event. Having the right agent on your side can make all the difference.
Interest rates can affect the buyers approved mortgage amounts. Low interest rates mean more competition amongst buyers and more activity on each property for sale. High interest rates will lower people’s motivation to buy a home, which helps drive a buyer’s market.
Negotiations as a Seller
Sellers and Realtors will decide on a pricing strategy at the time of listing. Pricing strategies include pricing at market value to Other options renters, family members
Attorney Review Period
Everything in a contract is negotiable. Yes, everything. With that being said, there are many customary things in a contract.
This is going to apply for a standard sale. A seller will usually pay for any town inspections. If a home has a well and/or septic, the seller pays for the water test and the buyer pays for the septic inspection. Inspection time frames are usually 10-14 days after the Attorney Review Period ends.
Normally, the seller will cover the cost of both their real estate agent and also the buyer’s real estate agent. When you hire a buyer’s agent, the agent will go over the Buyer’s Agency Agreement with you. In order to have an agent work for you, you’ll need to sign this. This will go over your agent’s cost before you start looking at homes. Again, negotiable. This Agreement is like an employment agreement for your agent to work for you. With this, your customer service experience should be top-notch.