Don't agree to close within a "reasonable time." Some contracts use vague phrases like this. But what's reasonable to you may be different from what's reasonable to the seller. Far better to set a date, then later agree with the seller (in writing) to change it. Some contracts use vague phrases like this. But what's reasonable to you may be different from what's reasonable to the seller. Far better to set a date, then later agree with the seller (in writing) to change it.

* Impact on your first interest payment. Impact on your first interest payment. Loan interest is paid in arrears-meaning the beginning of one month, you pay for the interest that accrued the previous month (on October first, you pay the interest that accrued in September). You'll prepay that cost when you close (so if you close September 15, you'll prepay the interest that accrues between September 15 and 30). If you close at the end of the month, you pay only the few days left before month's end. If you close at the beginning of the month, you pay interest for the entire month. Closing at the end of the month keeps some cash in your pocket-at least for a short while. Loan interest is paid in arrears-meaning the beginning of one month, you pay for the interest that accrued the previous month (on October first, you pay the interest that accrued in September). You'll prepay that cost when you close (so if you close September 15, you'll prepay the interest that accrues between September 15 and 30). If you close at the end of the month, you pay only the few days left before month's end. If you close at the beginning of the month, you pay interest for the entire month. Closing at the end of the month keeps some cash in your pocket-at least for a short while.* Moving date. Moving date. If you plan to move the day you close (which is ambitious), schedule the closing as early in the day as you can. If you plan to move the day you close (which is ambitious), schedule the closing as early in the day as you can.* Year-end tax concerns. Year-end tax concerns. If you're buying toward the end of the year, keep taxes in mind. Any points and interest paid before the new year can become deductions for this year's taxes. On the other hand, if you don't expect to itemize your deductions this year but will the next, it's probably worth waiting. Check with a tax adviser for the timing of any other deductions. If you're buying toward the end of the year, keep taxes in mind. Any points and interest paid before the new year can become deductions for this year's taxes. On the other hand, if you don't expect to itemize your deductions this year but will the next, it's probably worth waiting. Check with a tax adviser for the timing of any other deductions.* Property taxes. Property taxes. Depending on what state you live in, you may be able to lower your property taxes through a "homestead" or "principal residence" exemption. (Some states limit this to certain groups, like the elderly or disabled, and other states don't have it at all.) If such an exemption is available, you may need to be living in your home by the 1st of January. Check with a tax adviser. Depending on what state you live in, you may be able to lower your property taxes through a "homestead" or "principal residence" exemption. (Some states limit this to certain groups, like the elderly or disabled, and other states don't have it at all.) If such an exemption is available, you may need to be living in your home by the 1st of January. Check with a tax adviser.* Your lender's patience. Your lender's patience. Make sure the closing date is set before your lender's commitment-or any interest rate lock-expires. You may be able to extend the commitment, but at a price. Make sure the closing date is set before your lender's commitment-or any interest rate lock-expires. You may be able to extend the commitment, but at a price.

Strategies in a Cold Market: What to Ask For

If you're buying in a cold market, your offer may be the only one the seller sees, which you can use to your advantage. Virtually every aspect of the purchase agreement-price, closing date, who pays various fees, and what the seller leaves behind (such as custom decorations)-becomes negotiable. Your agents can suggest other things to ask for, such as a $5,000 to $10,000 credit at closing, a year of paid property taxes, or a year of paid assessments (for a condo).

Of course, notes adviser Mark Nash, "Your number-one priority is a reduction in the sales price. Many sellers resist that, but it raises fewer questions with both the IRS and your lender." In Massachusetts, adviser Nancy Atwood reports, "I've also noticed sellers coming up with their own incentives-for example, offering to leave their car or widescreen TV behind!"

Strategies in a Hot Market: Making Your Offer Stand Out

If you're in a particularly hot market, or just know that other buyers will be aching to get their hands on a particular house, you've got to work harder to make your offer the top pick. Here are some steps you can take: * Act quickly. Act quickly. Chances are you're not the only one who likes this house, so you may have to submit an offer immediately. Chances are you're not the only one who likes this house, so you may have to submit an offer immediately.* Have your agent personally present your offer. Have your agent personally present your offer. Unless the seller refuses, this can show the seller why you're better than the rest. Unless the seller refuses, this can show the seller why you're better than the rest.* Offer more money. Offer more money. Your offer will stand out if it's the highest, even by a few thousand dollars. Your offer will stand out if it's the highest, even by a few thousand dollars.* Tell your personal story. Tell your personal story. When you submit your offer, include a letter explaining why you want to purchase the property and what you like about it. Include information that you think will be important to the seller, based on both the home itself and what you know about the seller personally. For example, if the garden is lovingly cared for, your letter might mention your own green thumb. Although some real estate professionals scoff at this idea, it's not ridiculous if it works-and a seller who is attached to a home will appreciate knowing that it will be cared for by the next owner. When you submit your offer, include a letter explaining why you want to purchase the property and what you like about it. Include information that you think will be important to the seller, based on both the home itself and what you know about the seller personally. For example, if the garden is lovingly cared for, your letter might mention your own green thumb. Although some real estate professionals scoff at this idea, it's not ridiculous if it works-and a seller who is attached to a home will appreciate knowing that it will be cared for by the next owner.

Tell the sellers our story. Aaron and Sasha were buying their first house in a particularly hot housing market. Aaron says, "We were trying to be realistic-a friend of ours had made nine offers before one was accepted. But we pretty much fell in love with the first house we saw. In our offer, we included a letter about how much we loved it and were looking forward to raising a family there. But we didn't submit the highest offer: A developer who was going to gut and flip the property offered more. I think the sellers couldn't stand the thought of having the place ripped apart, though, because they accepted our offer instead." Aaron and Sasha were buying their first house in a particularly hot housing market. Aaron says, "We were trying to be realistic-a friend of ours had made nine offers before one was accepted. But we pretty much fell in love with the first house we saw. In our offer, we included a letter about how much we loved it and were looking forward to raising a family there. But we didn't submit the highest offer: A developer who was going to gut and flip the property offered more. I think the sellers couldn't stand the thought of having the place ripped apart, though, because they accepted our offer instead."

* Limit contingencies. Limit contingencies. While contingencies like financing and inspections are normal, try not to go overboard. In some very hot markets, buyers are even willing to forgo inspections-but this is a risk we wouldn't advise taking, since the house could have serious, but not immediately obvious, structural or other problems. While contingencies like financing and inspections are normal, try not to go overboard. In some very hot markets, buyers are even willing to forgo inspections-but this is a risk we wouldn't advise taking, since the house could have serious, but not immediately obvious, structural or other problems.* Get preapproved. Get preapproved. This shows that a lender has proclaimed you loan-worthy-and the seller can be confident that you'll likely meet the financing contingency. This shows that a lender has proclaimed you loan-worthy-and the seller can be confident that you'll likely meet the financing contingency.

Start with an all-cash offer. Octavio and Gina were trying to buy a house in a hot market and had already been outbid twice. Octavio recalls, "On our third offer, we not only bid more than we ever thought possible, but we made a high down payment (emptying our savings) then got both our parents to loan us the rest on a short-term basis. That let us make an offer with no financing contingency. It worked-we got the house, and then were easily able to get a mortgage and repay our parents." Octavio and Gina were trying to buy a house in a hot market and had already been outbid twice. Octavio recalls, "On our third offer, we not only bid more than we ever thought possible, but we made a high down payment (emptying our savings) then got both our parents to loan us the rest on a short-term basis. That let us make an offer with no financing contingency. It worked-we got the house, and then were easily able to get a mortgage and repay our parents."

*Offer better nonmonetary terms. You might find a seller motivated by things other than money, such as the need to close quickly (perhaps to pay the mortgage on a new house) or to rent the property back from you for a while (to look for a new house). You might find a seller motivated by things other than money, such as the need to close quickly (perhaps to pay the mortgage on a new house) or to rent the property back from you for a while (to look for a new house).

Contracting to Buy a Brand-New Home

If you're buying a newly constructed home from a developer, the process will probably differ from what we've described above. Whether or not you've got an agent representing you, the developer is likely to pressure you to use its standard purchase offer and maybe a separate form for the contract as well. While these might look like what you'd get from a local real estate agent, they can be very different, and the variations won't be written to benefit you.

The developer's form contract may, for example, allow the developer to substitute comparable products for the products you select (so if the flooring you chose is no longer available, the developer will select "comparable" flooring). It will also likely allow a big cushion for late delivery. If you see these terms, you'll have to argue to change them-and ignore the developer's insistence that the standard form can't be altered (it can).

To add to the challenge, you might not have a real estate agent to help you negotiate, understand, and interpret the contract language. In that case, you should either have the document reviewed by an attorney before signing or include a contingency allowing your attorney to review it before the deal is done.

If you feel the agreement is too one-sided, you can alter or write in additional terms-the developer, like any seller, can decide whether it wants to deal with you on those terms. For example, you might: * Limit your earnest money deposit. Limit your earnest money deposit. If you put down less cash, you'll have less at stake if the developer's performance is lacking. If you put down less cash, you'll have less at stake if the developer's performance is lacking.* Add a drop-dead date. Add a drop-dead date. Choose a date by which the house must be completed, or you have the option of walking away. Choose a date by which the house must be completed, or you have the option of walking away.* Negotiate a holdback. Negotiate a holdback. Add a clause requiring that a portion of the purchase price be set aside if the house isn't complete at closing, which you can then use to have the work completed. Add a clause requiring that a portion of the purchase price be set aside if the house isn't complete at closing, which you can then use to have the work completed.* Request several inspections and walk-throughs. Request several inspections and walk-throughs. If your house will be constructed according to your specifications, negotiate to have professional inspectors If your house will be constructed according to your specifications, negotiate to have professional inspectors and and you (by yourself) go through it several times-not just right before closing. That's to make sure the installations are happening on time, and that everything is being done right. you (by yourself) go through it several times-not just right before closing. That's to make sure the installations are happening on time, and that everything is being done right.* Get the same quality. Get the same quality. If you're buying a home that looks like the model, add a clause saying that you'll get the same or better quality, not simply that the quality will meet local building codes. If you're buying a home that looks like the model, add a clause saying that you'll get the same or better quality, not simply that the quality will meet local building codes.

Always Late ... But Worth the Wait?

One of the most frequent complaints from buyers in new communities is that their homes aren't built on time. Even reputable builders can get pushed back due to rain or other problems. Here are some terms you can include in your offer to compensate you for delays:* pro rata rent, based on your current home* pro rata hotel rental, based on the market price of an acceptable hotel* pro rata mortgage payment* credit toward upgrades based on pro rata mortgage costs, or* reduced price or free upgrades in exchange for allowing late delivery.

TIP.

Don't back down. Realtor Mark Nash advises, "Buyers need to go head to head with pushy developers. If they don't, they're asking to be taken advantage of." Realtor Mark Nash advises, "Buyers need to go head to head with pushy developers. If they don't, they're asking to be taken advantage of."

What's Next?

Once you and the seller have signed a contract, it binds you both. Now it's time to arrange your inspections, pull your financing together, get homeowners' and title insurance, remove contingencies, and close the deal. We discuss these topics in Chapters 11 through 14.

CHAPTER 11.

Toward the Finish Line: Tasks Before Closing

Meet Your Adviser Sandy Gadow, a nationally recognized expert on real estate closing and escrow, and author of a nationally recognized expert on real estate closing and escrow, and author of The Complete Guide to Your Real Estate Closing The Complete Guide to Your Real Estate Closing, widely considered the bible of escrow and closing. Sandy maintains a website, www.escrowhelp.com, where she shares real estate articles, tips, and advice.

What she doesSandy travels all over the United States and abroad in order to continue researching and tracking the latest developments in escrow and closing. With over 25 years experience as an escrow officer, Sandy has become a frequent contributor to newspapers and other publications nationwide, including The Wall Street Journal The Wall Street Journal online ( online (www.realestate-journal.com), and the Washington Post Washington Post. Shes also been a guest on CNNs Open House Open House and a speaker on national radio. Sandy continues to have direct contact with homebuyers as a licensed sales associate with Sothebys International Realty in Palm Beach, Florida, and a mortgage broker with Palm Beach Mortgage. She is a featured columnist at and a speaker on national radio. Sandy continues to have direct contact with homebuyers as a licensed sales associate with Sothebys International Realty in Palm Beach, Florida, and a mortgage broker with Palm Beach Mortgage. She is a featured columnist at realestatejournal.com.

First houseIt was a shack, really, on two acres of land that I discovered during a hike in Californias Point Reyes National Seashore. I was intrigued by the established trees, including redwood, apple, quince, and cypress; the small vineyard; and the investment potential. With a little research, I found that it was an abandoned estate, left to heirs in the Azores. I tracked down some U.S. relatives and negotiated to buy the property-it all wrapped up within 14 days, with no inspections or disclosures. This was my introduction to the property market, but it went smoothly, and I was so excited that I had no time to be nervous. When we moved in, we found cobwebs everywhere, white lace curtains hanging in shreds, beds still made, dusty dishes and glasses on the table, and jars of preserved fruits from the apple and quince trees-a scene frozen in time. It was a huge fix-up effort but is now worth many times more than what I paid for it.

Fantasy houseIt would have to be two houses: one in the countryside, in the South of France preferably, where I would work on the land, relax, and eat very well. The other would be in a city, such as London, where I could work and enjoy all the cultural activities, such as museums, theatres, ballets, and concerts, with the bonus of being able to take short-break trips to neighboring countries.

Likes best about her workFirst I should say that, after my first house purchase, I got the real estate bug and decided the best way to learn about investing in real estate was to become an escrow officer. I started working at a local title company shortly thereafter and have been doing that ever since. I wrote my first book, All About Escrow, All About Escrow, in 1981 because I saw a need to have a training manual for buyers, sellers, realtors, and escrow trainees and officers. And I still enjoy the fact that the real estate field is always changing, is always interesting, and involves meeting and dealing with new people every day. in 1981 because I saw a need to have a training manual for buyers, sellers, realtors, and escrow trainees and officers. And I still enjoy the fact that the real estate field is always changing, is always interesting, and involves meeting and dealing with new people every day.

Top tip for first-time homebuyersJust go for it-the best way to learn how to buy your first home is to buy your first home. But I also do mean for people to do their homework, ask a lot of questions, and never take no for an answer.

CD-ROM.

For more tips from Sandy Gadow, check out her audio interview on the CD-ROM at the back of this book.

Having signed a written agreement with the seller, you're in the home stretch-literally. But before you send out invitations to your housewarming party, let's focus on the few (but important) steps that remain before the sale closes: * Removing contingencies. Removing contingencies. You'll need to make sure all the conditions you placed on the transaction (like getting financing and approving your inspections) are met. You'll need to make sure all the conditions you placed on the transaction (like getting financing and approving your inspections) are met.* Getting title insurance. Getting title insurance. This is to verify that the seller has good title to the property and to protect you from claims to the contrary. This is to verify that the seller has good title to the property and to protect you from claims to the contrary.* Deciding how to take title. Deciding how to take title. Especially if you're buying with someone else, you'll need to choose what legal form your shared ownership will take. Especially if you're buying with someone else, you'll need to choose what legal form your shared ownership will take.* Getting ready to move. Getting ready to move. Prepare yourself, and anyone going with you, for the big change ahead. Prepare yourself, and anyone going with you, for the big change ahead.

Some of your other responsibilities-like arranging inspections and choosing insurance-will require more discussion, provided in future chapters. Then in Chapter 14, we'll describe what actually happens on closing day.

Wait! I Changed My Mind!

There are a few moments in the homebuying process where buyer's remorse -that sinking feeling that you've made a huge huge mistake-is common. If you're feeling panicked, try: mistake-is common. If you're feeling panicked, try:* Calling a homeowner. Calling a homeowner. Talking to a happy homeowner reminds you that it's worth it and that your fears are completely unoriginal! Talking to a happy homeowner reminds you that it's worth it and that your fears are completely unoriginal!* Driving by the house. Driving by the house. Take another look and imagine living there. Bring a loved one who will be excited for you. Take another look and imagine living there. Bring a loved one who will be excited for you.* Watching a home improvement reality show. Watching a home improvement reality show. Even if you're buying a brand-new house, or not changing a thing, it's fun to see others get creative. Try the DIY Network ( Even if you're buying a brand-new house, or not changing a thing, it's fun to see others get creative. Try the DIY Network (www.diynetwork.com) or HGTV (www.hgtv.com).* Doing something different. Doing something different. You've probably spent too much time talking with businesspeople and reading official papers. Take a break: a long hike, a movie, or a massage. You've probably spent too much time talking with businesspeople and reading official papers. Take a break: a long hike, a movie, or a massage.

Your purchase contract probably gave you at least a few weeks before the closing, unless you're waiting for a new house to be built. To help out, you and the seller will either hire a closing agent or one or more attorneys. They'll assist and monitor the process from start to finish.

CHECK IT OUT.

For a detailed chart of who typically handles the closing in your state: Refer to Refer to The Complete Guide to Your Real Estate Closing The Complete Guide to Your Real Estate Closing, by Sandy Gadow (McGraw-Hill).

Wrappin' It Up: Removing Contingencies

One of your main objectives for the period before the closing is removing (checking off as "done") contingencies in your purchase agreement. While you might be securing a loan and getting inspections, the seller may be working on performing repairs and finding a new place to live. Each of you will need to advise the other of your progress and, with the help of your real estate agents or attorneys, provide written releases when a contingency is removed. If either of you fails to meet or remove a contingency, you can either call off the purchase or renegotiate.

TIP.

If you need more time, ask. If, for example, a general inspection reveals that another specialized inspection is needed, you can ask the seller for additional time (in writing). The seller may say no, perhaps as an excuse to back out of the deal. Most sellers, however, are motivated to close the deal and will agree to a reasonable request. If, for example, a general inspection reveals that another specialized inspection is needed, you can ask the seller for additional time (in writing). The seller may say no, perhaps as an excuse to back out of the deal. Most sellers, however, are motivated to close the deal and will agree to a reasonable request.

Removing Your Inspection Contingency

Your purchase contract should include an inspection contingency. In Chapter 12 we'll explain what the various types of property inspections include and what problems they may reveal. Here, we're just going to talk about what to do when you get the inspector's report that explains the problems. Don't worry: Every house has hidden flaws or defects that you won't know about until the inspection.

After reviewing the report, you'll have to decide whether the problems can be fixed and whether you can live with them if they can't; who should pay for repairs; and what you'll do if you and the seller can't agree on who pays.

Whether the Problems Can Be Fixed

Discuss with the inspector or outside contractors whether the problems can be fixed and how much repairs are likely to cost. A pervasive mold problem, for example, sometimes can't be fixed, but a pet door that violates a fire code shouldn't require a team of specialists.

If a problem can't be fixed, you must decide whether you still want the property. Sometimes-like if repairs will take several weeks-the answer may be "no." In some states, your standard inspection contingency will say that you must give the seller a chance to fix a problem before backing out of the deal. But if the problem truly can't be fixed, you should be able to walk away.

Who Pays for Repairs

Your first inclination may be to ask the seller to pay for everything ("Hey, it's her her cat that needed the pet door-I don't even have a pet!"). You can certainly try, but don't be so unreasonable that the seller says, "Forget it!" cat that needed the pet door-I don't even have a pet!"). You can certainly try, but don't be so unreasonable that the seller says, "Forget it!"

TIP.

"Don't expect the house to be brought up to 'new' condition," advises Nancy Atwood, of ZipRealty. "All homes (except new construction) have issues that we refer to as 'the price of homeownership': loose faucets, old paint, and so forth. Asking for every little thing to be fixed is simply unreasonable." "All homes (except new construction) have issues that we refer to as 'the price of homeownership': loose faucets, old paint, and so forth. Asking for every little thing to be fixed is simply unreasonable."

If you've got some leverage-for example, you know the seller needs to move fast or that the house sat on the market for months before your offer came along-you can push harder for the seller to take responsibility. But if you know that the seller got a later offer that was higher than yours, you might want to keep requests to a minimum.

If the seller agrees to be financially responsible for all or some repairs, the two of you can handle it in one of a few ways, including: * Have the seller credit you a portion of the purchase price. Have the seller credit you a portion of the purchase price. Normally, when a deal closes, the seller gets paid the full contract price. Instead, you can have the seller agree to have the amount needed for repairs transferred directly to you at closing or put into a special account, which you'd draw on after closing. (Lenders prefer this, because it gives you an incentive to make the repairs rather than pocket the money.) Of course, this assumes you and the seller agree on the estimated repair costs and that those estimates will be accurate enough that you don't get stuck with a big bill. Normally, when a deal closes, the seller gets paid the full contract price. Instead, you can have the seller agree to have the amount needed for repairs transferred directly to you at closing or put into a special account, which you'd draw on after closing. (Lenders prefer this, because it gives you an incentive to make the repairs rather than pocket the money.) Of course, this assumes you and the seller agree on the estimated repair costs and that those estimates will be accurate enough that you don't get stuck with a big bill.* Reduce the sale price by the estimated cost of repairs. Reduce the sale price by the estimated cost of repairs. The advantage to this is that, with a lower purchase price on record, your annual property taxes will be lowered, as will your transfer tax if you live in a state where they're required (and from the buyer, not the seller). And you can do the repairs whenever you like-though you'll have to come up with the cash on your own. The advantage to this is that, with a lower purchase price on record, your annual property taxes will be lowered, as will your transfer tax if you live in a state where they're required (and from the buyer, not the seller). And you can do the repairs whenever you like-though you'll have to come up with the cash on your own.* Trust the seller to hire someone to make the repairs before the closing. Trust the seller to hire someone to make the repairs before the closing. This tends to be a bad idea. The seller may do the repairs on the cheap or, worse, attempt a do-it-yourself job. This tends to be a bad idea. The seller may do the repairs on the cheap or, worse, attempt a do-it-yourself job.* Hire someone to make the repairs before the closing, with the seller paying. Hire someone to make the repairs before the closing, with the seller paying. This may raise more problems than it solves-if the repair takes longer than expected, you can bump into your closing date. This may raise more problems than it solves-if the repair takes longer than expected, you can bump into your closing date.

Your lender may require certain repairs to be done before the deal is finalized. If you're paying for those repairs, discuss this with your mortgage broker-creative solutions are possible, such as taking out a larger mortgage to cover the repairs or reducing your down payment to free up the cash.

New Construction: Removing the Final Inspection Contingency

If you're buying a new home, you hopefully negotiated a "final inspection" contingency, which allows you to bring in a professional to approve the completion of the house before closing. Be prepared for unpleasant surprises-legions of homebuyers have discovered unfinished construction or major defects just days before they were supposed to move in.

If this happens, your most obvious choice is to delay the closing. However, that may be impossible if you've arranged to move. Your next-best bet is to go ahead with the closing but insist on a written agreement that says the money needed to complete your house will be taken from the purchase price and put into a trust account that the developer can't touch until the work is done. To keep the developer's feet to the fire, also add new deadlines to this agreement and state that if the work isn't done by these deadlines, the money must be returned to you. You can then hire outside contractors to finish the job.

Get an attorney's help drafting an addendum to your agreement. If the developer's contract prohibits this kind of agreement or if the developer won't agree, your final option is to make a list of the remaining tasks, assign each a completion date, and insist that the developer sign it before you agree to close. This is normally called a "punch list," and developers commonly agree to it. Unfortunately, you'll have to chase down the developer to get the work done.

TIP.