Negotiation and Purchasing Real Estate

The negotiation and purchasing of real estate is often completed through intermediaries for the actual buyers and sellers of the property, most often through real estate agents.

The two agents working on each side of the transaction are, in essence, working as fiduciaries for their clients. They have negotiating power due to the power of attorney they acquire, on the other hand, the client has the final say.

The agent for a buyer is expected to negotiate an asking price down, just as the seller is expected to try to maintain a price that is as close to the initial asking price as possible (an often criticized flaw in the realty system can be found to occur in the fact that both agents receive a commission if the sale is completed, therefore there can be an incentive on the part of the buying agent to not negotiate the best price for their client, thus protecting the amount of their commission). Once a price is agreed upon by the agents and their clients, there is still a very long way to go before the sale can be completed.

In order for a transaction to be completed, the buyer and seller are both entitled to a series of checks and balances, often called contingencies, in order to ensure full satisfaction of both parties. The seller is primarily entitled to a guarantee of purchase, or to put it simply, that the buyer is able to pay for the property. The task, in this case, falls upon the agent for the seller to perform a credit and background check on the buyer, and the buyer is naturally required to disclose that they have the means of completing the transaction.

If they buyer does not have the liquid capital for the sale, which is often the case, they typically must show proof of a mortgage agreement that will cover the purchase of the property. Sometimes, however, if the buyer is intending to purchase the new property with the proceeds of the sale of a previous or older one (but the sale has yet to be completed), they most be able to scrupulously illustrate that the sale is pending (this naturally, can become very complicated with all of the contingencies for this additional sale becoming incorporated into the first one).

The buyer is also entitled to a number of contingencies that would need to be satisfied. The buyer is allowed a full property inspection, and sometimes even a land survey, and has the right to have the property appraised in order to be sure they are paying a fair market value. In these cases, if there are irregularities discovered, it is not uncommon for a seller to also have the same procedures done in order to verify or discredit the findings. It is also not uncommon that deals can fall apart or be renegotiated upon the basis of appraisals and inspections.

Often the seller has to guarantee that when the property when transferred, it is in good condition, maintained to a standard level of cleanliness. If everything is found to be in order, and the property being offered is determined to be as promised, then a transaction may go forward.

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