Jim Valentine: Why We Do What We Do in Real Estate

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Jim Valentine about real estate

Jim Valentine about real estate

In the real estate industry, there are many standard practices that are traditionally used for good reason. We think it is important to revisit them from time to time to find out why we use them, so that their purpose is clear to the public, as well as to practicing novices who may not have evidence of their failure in their practice. Some of these are legal requirements, others are good policies to protect members.
In a home purchase agreement that deals with a loan, the buyer limits the interest rate he is willing to pay on the loan to a simple line that says, “The interest rate must not exceed ___%.”
The amount should be slightly higher than the current rate to soften its movement, but there should be a cap that exceeds the amount they are willing to pay, even if they qualify. This happened during the 1980 period when interest rates skyrocketed to 18% and 9 points for VA loans and some people were still eligible for the loan. They were subject to forfeiture of their deposit and / or being held liable for specific performance.
To be clear, this does not set their interest rate on the loan, but simply limits it if the rates work. In addition to protecting the buyer from an inflated rate, it protects him from market shifts. If interest rates skyrocket for any reason, market prices will fall equally. Sellers should expect this item, but make sure the quoted rate is reasonable for the market they are in.
Another cost limiting clause is the repair clause. It is designed to protect the seller from unlimited repairs in the event that inspections / investigations reveal an unexpected major repair requirement. Roofs usually illuminate this point when, after inspection, a new roof is required, and its cost exceeds the repair limit specified in the contract. This is usually agreed to in order to keep the transaction in effect, but either party has the right to terminate the transaction if this is not the case. Such negotiations can come into play in AS-IS transactions where there is no repair if the unknown issue is significant enough to disrupt the transaction.
Contractual agreements must have an end date. The contract itself must have an expiration date, otherwise it is invalid. It’s better to specify in the agreement a time frame for completing the tasks that should be done in the process, rather than hoping that everything will be done at the end when you should close.
If you leave everything to the end and something is incomplete, you may find it difficult to close a timely or successful completion. This should be considered and taken into account when drawing up a contract and perpetuating it.
All parties to the transaction must sign the documents. If there is no signature on the listing, the listing agent cannot guarantee that all ownership interests will be held. In real estate, unlike corporate shares, any interest has the same power as a controlling interest and can prevent a sale. If you only have one spouse signing as a buyer, you may find it difficult if the other spouse’s income or subscription is required to obtain a loan. Everyone needs to cooperate. Exceptions are the managing member of the LLC, or where the family trust requires only one required signature.
Make sure you understand what you are signing and why. Your agent should be able to tell you the background story for the activity you are interested in and why you should include or exclude it. Everything related to a real estate transaction is negotiable, but in order to successfully negotiate, you must understand their meaning and relevance to everything. Ask if you don’t understand.
It’s okay if your agent doesn’t have an answer to something, if he gets an answer for you in a timely manner so that you don’t miss out on an opportunity in this dynamic market. Sometimes this understanding allows you to skip a step that will separate you from the rest of the “pack” in a trading situation.
When it comes to choosing professionals to help you with your real estate needs … the experience is invaluable! Jim Valentine, affiliate of RE / MAX Realty, 775-781-3704 or dpwtigers@hotmail.com



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