The best advice this office can give regarding all real estate transactions is start with an attorney. Although the purchase of a home is the single largest purchase that a person will make during his or her lifetime, individuals usually contact an attorney only after an Offer to Purchase is already signed by him or her.
When a party finds real estate that they wish to purchase, an Offer to Purchase is generally prepared by a real estate agent and signed by the buyer(s). If the Offer is satisfactory to the Buyer(s), the Buyer(s) will accept the Offer (by signing the same document). After the offer is accepted a Purchase and Sale Agreement (“P&S”) is prepared by the Seller(s) attorney for the Buyer(s) to sign. The terms of the Offer to Purchase are binding and are added into the purchase and sale agreement. Although most transactions seem to go somewhat smoothly through the Offer stage into the P&S stage, I have been involved over the years in real estate transactions which have been riddled with problems due to the terms of the original Offer. By conferring with an attorney at the Offer stage, these problems can be eliminated.
Remember: the Offer to Purchase is a legally binding contract and not merely the first step in the process. Once the Offer to Purchase has been signed by both parties (buyer and seller) you are locked into the deal. Although an Offer to purchase usually contains a clause which states that a buyer may rescind (back out) of a deal after a home inspection if a “material defect” is found by the inspector, that does not mean merely a “change of mind” by either party.
Please note: A “material defect” not merely a problem with the house or an issue that a prospective buyer does not like, but must be a defect which makes the property not able to be “used for its intended purpose” (e.g. a residence). Being told by the inspector that the furnace is old, for example, does not constitute a material defect.
After inspections buyers will sometimes seek additional credits toward their purchase for items that an inspector has discovered. The seller does not have to make any concessions of any credits or monies back, nor is the seller obligated to fix or repair any item unless said item constitutes a “material defect” rendering, for instance, the house not being used as a residence. Although you may not be happy with items discovered on an inspection, unless they are material defects, they (the items) are not deal breakers and you are legally bound to go through with the deal.
Over the years I have dealt with a lot of buyers who will say, the worst that can happen if I back out of the deal is that I lose my deposit. THAT IS NOT THE WORST THAT CAN HAPPEN. If either side backs out of a deal except for, as example, a material defect in the home or a buyer’s failure to get financing, either side is in a position to compel the other side to consummate the deal through a legal proceeding known as a suit for “Specific Performance”. As the law considers every piece or real estate unique (no two parcels of real estate are the same even if the houses are identical) the courts will, almost always, compel the party who is seeking to back out, to go through with the sale.
Bottom line is: Do not let a real estate agent convince you that you should make an offer on a house by stating that the worst that can happen is you lose your deposit. The suit known as a suit for “Specific Performance” can be filed by either side if the other sided tries to change their mind and back out of the deal.