In today’s competitive real estate market, my team and I focus on maximizing seller net proceeds, strengthening negotiation leverage, and minimizing the inevitable hassles of the home selling process.
After years of representing sellers, we’ve identified seven critical contract terms that make all the difference.
Let me walk you through the 7 essential contract term elements.
Table of Contents
Setting the Stage for Success
Before examining specific contract terms, it’s crucial to create the right conditions for receiving strong offers.
At Shapiro Real Estate Group, we implement several proven strategies:
- Pre-inspections eliminate uncertainty and reduce buyer leverage
- Comprehensive seller disclosures build trust and prevent renegotiations
- Documented home improvements with dates and costs justify higher prices
- Professional marketing materials attract serious, competitive buyers
With these foundations in place, sellers can negotiate from a position of strength.
Video
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7 Critical Contract Terms
Price
While price is the most obvious term, it must be evaluated alongside other contingencies. As my colleague Lee Abraham notes, “It’s not just about the price, it’s about the leverage.”
In today’s market, we often recommend listing at comparative market value rather than maximum potential price. This “go low, aim high” strategy maximizes property exposure and creates a competitive environment where emotional bidding drives final prices well above asking.
Option Period (Amount and Duration)
The option period gives buyers the unrestricted right to terminate for any reason. This is particularly important in Texas, where buyers pay for this termination right.
Two factors matter here:
- Option fee amount: Higher non-refundable fees favor sellers
- Option period length: Shorter periods (3-5 days versus 10-14) reduce seller risk
Strategically, reducing the number of days is often more important than increasing the fee amount, as it limits the buyer’s window to back out.
Appraisal Waiver
With escalating prices, appraisal issues have become increasingly common. Three possibilities exist:
- Cash offers: No appraisal required
- Full waiver: Buyer commits to cover any gap between sale price and appraisal
- Partial waiver: Establishes a floor (often list price) below which renegotiation is possible
A higher-priced offer without an appraisal waiver may be an illusion if the property won’t appraise at the offered price. When representing sellers, we always push for full waivers when possible.
Buyer Approval Waiver
The financing contingency allows buyers to terminate if they cannot secure financing. Working with pre-approved buyers who waive this contingency significantly reduces seller risk.
In today’s competitive market, serious buyers should be willing to waive this contingency or at minimum have very short approval timeframes. This is another “out” we work to close for our sellers.
Earnest Money
Earnest money is a refundable deposit held by the title company that serves as the seller’s protection after the option period ends.
Higher earnest money indicates a committed buyer and provides compensation if the deal falls through after contingencies are cleared. When evaluating multiple offers, we look closely at this figure as it directly correlates to the buyer’s commitment level.
Title Insurance
Traditionally paid by sellers, in today’s competitive market buyers may offer to cover this expense.
This typically costs about 0.7% of the purchase price, so it’s easily several thousand dollars on most deals. When a buyer covers this cost, it directly improves the seller’s net proceeds, making it an important concession to negotiate.
Closing Date
The timeline to closing can significantly impact sellers, especially if they need funds by a specific date for another purchase.
Cash offers typically provide more closing date flexibility with faster options (as few as 7-10 days) compared to financed offers that require more processing time. For sellers with tight timelines, this can be a deciding factor between otherwise similar offers.
A Real-World Example
Let me share a realistic scenario.
Imagine receiving three offers on your $1.6 million listing:
- Offer #1: List price ($1.6M), cash, 5-day option period with $2,500 fee, no appraisal needed, no buyer approval needed, $32,000 earnest money, buyer pays title insurance, 15-day close
- Offer #2: 5% above list ($1.68M), financed with 50% down, 5-day option with $7,000 fee, full appraisal waiver, no buyer approval needed, $32,000 earnest money, buyer pays title insurance, 30-day close
- Offer #3: 10% above list ($1.76M), financed, 5-day option with $5,000 fee, NO appraisal waiver, includes buyer approval contingency, $50,000 earnest money, buyer pays title insurance, 30-day close
Which is best? It depends entirely on your specific objectives:
- Need absolute certainty? Offer #1 (cash) provides the clearest path to closing
- Willing to accept some risk for more money? Offer #2 balances a higher price with reasonable security
- Highest potential but highest risk? Offer #3 could fall apart if the appraisal comes in low
This is where our expertise becomes most valuable – helping you weigh these factors against your personal circumstances and risk tolerance.
Conclusion
Understanding these seven contract terms gives you powerful tools to evaluate offers beyond just the price.
As real estate professionals, we enjoy diving into these details to ensure our clients get what they deserve in the transaction.
If you’re considering selling your home, I’d love to discuss how we can maximize your property’s value using these proven strategies. Send me an email by clicking here.