© 2011 Cengage Learning

Writing and Presenting Effective Purchase Contracts Chapter 7 © 2011 Cengage Learning

RATIONALE FOR CHAPTER Choosing the right broker to work for is probably the most important decision a new licensee makes!

© 2011 Cengage Learning RATIONALE FOR CHAPTER This chapter illustrates the “art of selling.” It discusses how to effectively handle the emotions and thought processes that buyers go through when making buying decisions.

© 2011 Cengage Learning RATIONALE FOR CHAPTER The chapter discusses many of the reasons why people buy property, and states many of the common objections made by buyers and how to handle them. A detailed analysis of the residential purchase agreement (revised 4/10) is found in this chapter.

© 2011 Cengage Learning CHAPTER SEVEN OUTLINE 7.1 SELLING OR COUNSELING 7.2 WRITING THE RESIDENTIAL PURCHASE CONTRACT 7.3 UNDERSTANDING THE RESIDENTIAL PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (RPA-CA) 7.4 PREPARING TO PRESENT THE OFFER TO PURCHASE

© 2011 Cengage Learning CHAPTER SEVEN OUTLINE 7.5 NEGOTIATING THE OFFER WITH THE SELLERS AND LISTING LICENSEE 7.6 SELLING YOUR OWN LISTING 7.7 HANDLING SINGLE AND MULTIPLE COUNTER OFFERS 7.8 BUYERS ESTIMATED CLOSING COSTS 7.9 SETTING UP THE ESCROW TIMELINE

© 2011 Cengage Learning SELLING OR COUNSELING Differences? Types of closes that an agent may use. Use of and differences between open- end and closed-end questions.

© 2011 Cengage Learning WRITING THE RESIDENTIAL PURCHASE CONTRACT Why do people decide to buy homes (security, pride of ownership, etc.)? Why do people decide not to buy (restricted mobility, greater responsibility, etc.). Mirroring and its effect on communication.

© 2011 Cengage Learning WRITING THE RESIDENTIAL PURCHASE CONTRACT Common objections made by buyers and how to handle them effectively. Benefit of giving the buyers each page of the purchase agreement as you finish writing it, and asking them to read it and ask questions.

© 2011 Cengage Learning UNDERSTANDING THE RESIDENTIAL PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTION California Statute of Frauds requires that all real estate contracts be in writing, except for leases of one year or less. Importance of clarity in a purchase agreement.

© 2011 Cengage Learning UNDERSTANDING THE RESIDENTIAL PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTION The form acts as a checklist while creating a contract and this is done to ensure completeness and to protect the rights of all parties to the contract. Difference between a bilateral agreement and a unilateral agreement and how each affects the rights of the parties.

© 2011 Cengage Learning INITIAL INFORMATION Information required at the top of page of the purchase contract (i.e. date, names of the parties, address and/or legal description, etc.).

© 2011 Cengage Learning C.A.R. RPA-CA C.A.R. RPA-CA Sub-paragraphs A through L of the financing paragraph 2. If a buyer makes a “cash” offer, the buyer must verify the source of his or her funds to the seller within the prescribed time or the seller can cancel the offer.

© 2011 Cengage Learning C.A.R. RPA-CA C.A.R. RPA-CA Paragraph 3 of the Purchase Contract lists closing & occupancy details. Paragraph 4 is allocation of costs.

© 2011 Cengage Learning C.A.R. RPA-CA Disclosures required in paragraphs 5; who they protect and why. Importance of adhering to the time limitations in paragraph 14.

© 2011 Cengage Learning C.A.R. RPA-CA C.A.R. RPA-CA Contingent sale and its ramifications on how this type of contingency will be viewed by a seller. “Who, when, and how” of FIRPTA withholding. Limitations of earnest money deposits.

© 2011 Cengage Learning C.A.R. RPA-CA C.A.R. RPA-CA Importance of paragraph 22 to the seller and to the agent. Importance to the brokers and agents of paragraph 25. Need for clarity when writing anything in paragraph 27.

© 2011 Cengage Learning C.A.R. RPA-CA C.A.R. RPA-CA Statements in paragraph 30 and why they are included in the contract. Importance of strictly adhering to paragraph 28 by giving a copy of each document a principal signs to him or her immediately after he or she signs.

© 2011 Cengage Learning C.A.R. RPA-CA How to handle the creation of a counter offer and how to incorporate it into the purchase agreement. Why is it important to have clarity in writing a counter offer.

© 2011 Cengage Learning SHORT SALE What is a short sale and what type of cooperation is required from the lender and sellers. Contract language that must be included in the purchase agreement to protect the rights of all parties (buyers, sellers, and lender).

© 2011 Cengage Learning PREPARING TO PRESENT THE OFFER TO PURCHASE Importance of the buyer’s agent having solid, factual data about recent property sales in the seller’s neighborhood. Benefits of a buyer’s agent presenting an offer in person instead of by fax (what the buyer’s agent should do to better represent the buyers when he or she is precluded from presenting an offer in person.)

© 2011 Cengage Learning PREPARING TO PRESENT THE OFFER TO PURCHASE Importance of having the buyers prepared to meet with you in person after their offer is presented, and why phone presentations of counter offers are not a good idea.

© 2011 Cengage Learning NEGOTIATING THE OFFER WITH THE SELLERS AND LISTING AGENT Importance of meeting with listing agent shortly before meeting with the sellers. Benefit of having the listing agent present the buyer’s agent’s offer even while the buyer’s agent is present. Negotiation tactics including awareness of the sellers’ body language and voice inflection.

© 2011 Cengage Learning SELLING YOUR OWN LISTING Pros & cons of an agent selling his or her own listing. One party gets too pushy about receiving inappropriate information about the other party. How would you handle it?

© 2011 Cengage Learning SELLING YOUR OWN LISTING Proper sequence of presenting the dual agency disclosure and election. Role of the Golden Rule in presenting an offer on one’s own listing.

© 2011 Cengage Learning HANDLING SINGLE AND MULTIPLE COUNTER OFFERS Be sure to have a copy of the counter offer form with you when you have this discussion. What to do if the buyer’s agent receives an acceptance without a counter offer (deliver immediately to the buyer).

© 2011 Cengage Learning HANDLING SINGLE AND MULTIPLE COUNTER OFFERS Steps in preparing a counter offer if acting as the seller’s agent and how to best present the counter offer to the buyers in a calm, logical sequence, if acting as the buyer’s agent.

© 2011 Cengage Learning HANDLING SINGLE AND MULTIPLE COUNTER OFFERS How to represent the sellers when they have received multiple offers should they accept the best offer issue multiple counter offers or counter the offer they feel is the most worthy Potential for litigation and hard feelings if multiple offers are not presented fairly and handled properly.

© 2011 Cengage Learning BUYERS ESTIMATED CLOSING COSTS Issue of closing costs to the buyers’ attention. Giving the buyers a written estimate of their closing costs as early as possible.

© 2011 Cengage Learning SETTING UP THE ESCROW TIMELINE Duties and responsibilities of each party to the escrow. Differences in escrow procedures between southern and northern California. Does this impact the escrow timeline?