Price and Financing

When you prepare your offer, spell out precisely the purchase price of the property and the terms of the financing. List the amounts payable, how payable, when payable, and the interest rate(s). Make it easy for a disinterested third party to interpret your meaning. Leave nothing to decide at some later date. "Seller agrees to carry back $20,000 on mutually agreeable terms" does not meet the contractual requirements of specificity.

If you are planning to arrange new financing, or even if you are assuming the seller's mortgage, the same advice holds: Don't leave the amount and terms of financing open to question. Several years ago, I agreed to purchase a property and assume the seller's below-market rate mortgage. However, just before closing, the lender pointed out that it intended to increase the interest rate to the market level. Fortunately, my contract with the sellers specified that the mortgage assumption would go forward at the same below-market interest rate that the sellers were paying. Rather than lose the sale and risk a lawsuit, the sellers had to buy down the mortgage interest rate from the rate the lender would otherwise have charged.

If you agree to arrange new financing, spell out the maximum terms (e.g., 7 percent, 25 years, 20 percent down). Then, if it turns out that (in good faith) the best loan you can find is at 7.75 percent, 20 years, 25 percent down, you need not complete the purchase. You can walk away and obtain a return of your earnest money deposit. (But be sure your financing contingency seems reasonable to the sellers. As noted elsewhere, savvy sellers won't accept unrealistic contingencies.)

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