In today’s market, negotiating the sale of your home is never complete until the closing documents have been signed and recorded at the recorder’s office the following business day. The entire process can take as little as 30 days or as long as six months, depending upon the condition of the property and the abilities of all the parties involved, including realtors, appraisers, home inspectors, mortgage originators, mortgage underwriters, mortgage insurance underwriters, escrow closing officers, FHA/VA/AHFC project and subdivision approvals. That’s a multi-step process and anywhere along the way, things can get delayed, lost, miscommunicated or just plain derailed.

    Negotiating an agreed upon purchase price is only the first step. Even in today’s fast-paced market, most offers require one or two counters. These counteroffers need to be in writing and signed by all involved parties. If two people are in title to the property, it requires both seller’s signatures. Buyers are still asking sellers to pay additional closing costs and these costs must be identified not by type but by maximum amount. Closing dates are important to sellers, particularly for builders who have interest carrying charges.

    Once price, closing costs and time for performance are agreed upon, the next step is the approval of the home inspection report. Buyers are encouraged to get a home inspection (paid for by them) and their offer will be contingent upon their approval of the inspection report. Home inspections vary widely, depending upon the qualifications and thoroughness of the inspectors. The best home inspectors are licensed, bonded, insured and a professional engineer. Both buyers and sellers have the right as identified in the MLS purchase and sale agreement to renegotiate the purchase price based upon the home inspection report. In today’s market, if the buyer requests items beyond health and safety repairs, the purchase price is often frequently increased or the transaction is terminated.

    The final negotiation has to do with the appraised value of the home. If, for some reason, the appraisal does not meet the agreed upon purchase price, the seller is in for another round of negotiations. In a fast paced market where we have had an 8% increase in values in some market segments during the first quarter of 2013, it is difficult for an appraiser to keep up due to their required reliance upon closed sales data. Appraisals are now ordered through third party entities on a rotation basis and it is no longer possible for mortgage originators or realtors to request their favorite appraiser. This has good and bad implications. The good is that there can never be the appearance of collusion or price fixing. The bad is that in the past appraisers frequently were able to specialize in an area of the market which gave them in-depth knowledge of subdivisions, builders, price ranges and locations. Now, appraisers are generalists and as generalists their knowledge is not going to have the market depth of a specialist.

    When an appraisal does not meet or exceed the agreed upon sales price, it is usually the resale seller who takes the hit. On the other hand, if the appraisal exceeds the purchase price, buyers think they got a good deal. Buyers of new homes are adding a lot of extras on to their purchase price but they can’t expect appraisers to always add the full cost of their add-ons in which case they must pay out of pocket for their ‘have-to- have’ upgrades.

    By the time this three step process is finished and buyer and seller are at their separate closing tables, the negotiations are hopefully over, assuming the title report and the HUD statement do not have any surprises.