Module 6: Making Offers and Closing Deals

A Beginner's Guide to Building Wealth Through Property

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Module Overview

Time Required: 120-150 minutes
Difficulty Level: Beginner to Intermediate
Prerequisites: Modules 1-5 completed

Learning Objectives

By the end of this module, you will be able to:

1. Determine the right offer price using multiple valuation methods
2. Structure competitive purchase offers with appropriate terms
3. Understand and use contingencies to protect yourself
4. Negotiate effectively with sellers and their agents
5. Navigate the entire contract-to-close timeline
6. Understand closing costs and how they're calculated
7. Complete final walkthrough and closing day procedures
8. Handle common problems that arise during the closing process
9. Take possession of your first investment property confidently

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Part 1: Determining Your Offer Price

Before writing an offer, you need to determine what the property is truly worth and what you're willing to pay.

Three Valuation Approaches

1. Market Value (What It's Worth)

Comparable Sales Analysis (Comps):

The most reliable method for determining market value.

Process:

1. Find 3-5 recently sold properties (last 3-6 months)
2. Similar characteristics to subject property:
   • Same neighborhood (within 0.5 miles ideal)
   • Similar size (within 20% square footage)
   • Same beds/baths (or very close)
   • Similar age and condition
   • Similar lot size
3. Analyze sale prices
4. Adjust for differences
5. Determine market value range

Example Comparable Sales Analysis:

SUBJECT PROPERTY: 123 Main St
- 3 bed, 2 bath
- 1,500 sq ft
- Built 2005
- Good condition
- 0.25 acre lot

COMPARABLE 1: 125 Elm St (Sold 2 months ago)
- Sold for: $215,000
- 3 bed, 2 bath, 1,450 sq ft
- Similar condition
- 0.20 acre lot
Adjustment: +$3,000 (smaller lot), -$2,000 (less sq ft)
Adjusted Value: $216,000

COMPARABLE 2: 456 Oak Ave (Sold 4 months ago)
- Sold for: $225,000
- 3 bed, 2 bath, 1,550 sq ft
- Updated kitchen (+$10,000 value)
- 0.25 acre lot
Adjustment: -$10,000 (kitchen), -$2,000 (more sq ft)
Adjusted Value: $213,000

COMPARABLE 3: 789 Pine Rd (Sold 3 months ago)
- Sold for: $208,000
- 3 bed, 2 bath, 1,500 sq ft
- Average condition (-$5,000 value)
- 0.30 acre lot
Adjustment: +$5,000 (condition), -$2,000 (bigger lot)
Adjusted Value: $211,000

MARKET VALUE RANGE: $211,000 - $216,000
ESTIMATED MARKET VALUE: $213,000

Where to Find Comps:

• Your real estate agent (best source - MLS sold data)
• Zillow (public sold listings)
• Redfin (public sold listings)
• County assessor records

Comp Analysis Tips:

• Newer comps are better (market changes)
• Closer proximity is better
• Actual sales, not list prices
• Adjust for significant differences
• Get agent's professional CMA (Comparative Market Analysis)

2. Investment Value (What It's Worth to You)

Market value doesn't matter if the investment doesn't meet your criteria.

Your Maximum Offer Formula:

Step 1: Calculate Maximum Purchase Price Based on Returns

Target Monthly Rent: $1,600
Target Monthly Cash Flow: $200
Total Monthly Expenses (operating + mortgage): $1,400

Working Backwards:

If 20% down:
Maximum loan payment: $1,400 - $800 (operating expenses) = $600/month

At 7% interest, 30 years:
$600/month payment = ~$90,000 loan

Purchase Price = $90,000 loan ÷ 0.80 = $112,500
Down Payment = $22,500

This property must be $112,500 or less to meet your criteria!

Alternative Formula (Cap Rate Method):

Desired Cap Rate: 8%
Annual NOI: $10,800

Maximum Price = NOI ÷ Cap Rate
Maximum Price = $10,800 ÷ 0.08 = $135,000

You shouldn't pay more than $135,000 if you want 8% cap rate

Your Investment Value Determines Your Walk-Away Price:

Market Value: $213,000
Your Maximum Investment Value: $135,000

Conclusion: Property is overpriced for your investment criteria.

Options:
1. Make offer at your number and expect rejection
2. Pass on this property
3. Adjust your criteria (accept lower returns)

3. Repair-Adjusted Value

If property needs work, factor repairs into offer price:

Market Value (As-Repaired): $213,000
Needed Repairs: $20,000
Repair-Adjusted Offer: $193,000

Your Logic: "Property worth $213,000 when fixed, but needs $20,000 
in repairs. Therefore, I'll offer $193,000 so my all-in cost is 
$213,000."

The Offer Price Decision Matrix

Consider all three valuations:

Market Value: $213,000
Investment Value (your criteria): $195,000
Repair-Adjusted Value: $193,000

Your Offer Price Options:

Option A: Lowball at Investment Value
- Offer: $195,000
- Likelihood of acceptance: Low
- Best case: Save $18,000
- Risk: Insulting offer, immediate rejection

Option B: Split the Difference
- Offer: $204,000 ($9,000 below market)
- Likelihood of acceptance: Moderate
- Reasonable compromise
- Opens negotiation

Option C: Slightly Below Market
- Offer: $208,000 ($5,000 below market)
- Likelihood of acceptance: High
- Small discount
- Likely to close

Option D: Full Market Value
- Offer: $213,000
- Likelihood of acceptance: Very high
- No discount
- Use in competitive situations

Option E: Above Market (Rare)
- Offer: $218,000+
- Guarantee acceptance
- Only in multiple offer situations
- Only if numbers still work

Factors Influencing Offer Price:

Aggressive (Lower) Offers When:

• Property needs significant work
• Long days on market (60+)
• Seller is motivated/must sell
• Market is slow/buyer's market
• Property overpriced initially
• Few competing buyers
• You have multiple backup options

Conservative (Higher) Offers When:

• Property in great condition
• Recently listed (less than 7 days)
• Hot neighborhood
• Multiple interested buyers
• Seller not motivated
• Seller's market conditions
• This is your ideal property

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Part 2: Structuring Your Offer

An offer is more than just price. Terms matter significantly.

Key Offer Components

1. Purchase Price The amount you're offering to pay.

2. Earnest Money Deposit (EMD)

What It Is: Good-faith deposit showing you're serious, held in escrow until closing.

Typical Amounts:

• 1-3% of purchase price
• $1,000-$5,000 for properties under $200,000
• Higher in competitive markets

Example:

Purchase Price: $200,000
EMD: $3,000 (1.5%)

This money goes toward your down payment at closing.
If you back out without valid reason (outside contingencies), 
seller may keep EMD.

Strategy:

• Higher EMD shows you're serious
• Don't offer so much you can't afford to lose it
• Ensure you have valid contingencies to protect it

3. Down Payment

What You're Paying:

Purchase Price: $200,000
Down Payment: $40,000 (20%)
Loan Amount: $160,000

Due at Closing:
- Down Payment: $40,000
- Less Earnest Money: -$3,000
- Plus Closing Costs: +$6,000
Total Cash to Close: $43,000

4. Financing Contingency

What It Says: "This offer is contingent upon buyer obtaining financing."

Why It Matters:

• Protects you if you can't get a loan
• Get earnest money back if financing falls through
• Must attempt to secure financing in good faith

Timeline:

• Typically 21-30 days to secure financing
• Pre-approval makes this less risky
• Some sellers prefer shorter periods

In Cash Offers:

• No financing contingency needed
• Much more attractive to sellers
• Removes uncertainty

5. Inspection Contingency

What It Says: "This offer is contingent upon a satisfactory property inspection."

Why It Matters:

• Allows you to inspect property
• Can renegotiate or cancel if issues found
• Protects you from buying problem property

Timeline:

• Typically 7-14 days for inspection period
• Must complete inspection and negotiate within timeframe
• Shorter periods more attractive to sellers

Types:

General Inspection Contingency: "Buyer may inspect property and request repairs or cancel if unsatisfied."

Specific Inspection Contingency: "Contingent upon roof inspection showing at least 10 years remaining life."

As-Is Inspection (Informational Only): "Buyer conducts inspection for informational purposes but agrees to purchase as-is."

6. Appraisal Contingency

What It Says: "This offer is contingent upon property appraising at purchase price or higher."

Why It Matters:

• Lender only lends based on appraised value
• If appraisal comes in low, you need more cash or seller reduces price
• Protects you from overpaying

Example:

Offer Price: $200,000
Appraisal: $190,000

Without Appraisal Contingency:
- You must pay $200,000 or lose earnest money
- Need extra $10,000 cash to cover gap
- Or beg seller to reduce price

With Appraisal Contingency:
- Can renegotiate price to $190,000
- Or walk away and get earnest money back

In Competitive Markets: Some buyers waive appraisal contingency (risky!): "Buyer will pay $200,000 regardless of appraisal."

Only do this if you're prepared to bring extra cash.

7. Closing Date

What It Says: "Closing shall occur on or before [Date]."

Typical Timelines:

• Cash purchase: 7-14 days
• Financed purchase: 30-45 days
• FHA/VA loans: 45-60 days

Seller Preferences:

• Many sellers want quick closing
• Some need time to move
• Ask seller's agent about preferred timeline

Strategy:

• Offer flexible closing if possible
• "Buyer can close as early as [Date] or delay until [Date] at Seller's preference"
• Flexibility can win offers

8. Contingencies Summary

Standard Contingencies (Usually Included):

• Financing contingency
• Inspection contingency
• Appraisal contingency
• Title contingency (clear title required)

Additional Contingencies (As Needed):

• Sale of buyer's current home
• HOA document review (condos)
• Insurability (can obtain insurance)
• Survey contingency (verify boundaries)
• Specific repair contingency

Seller's Perspective on Contingencies:

• Fewer contingencies = more attractive offer
• Each contingency = opportunity for buyer to cancel
• Cash + no contingencies = seller's dream

9. Other Terms

Included Items: "Sale includes all fixtures: light fixtures, ceiling fans, window treatments, appliances (refrigerator, stove, dishwasher, washer, dryer), garage door openers and remotes."

Excluded Items: "Seller retains: antique chandelier in dining room, custom mirror in master bath."

Rent-Back Agreement (If Applicable): "Seller may rent back property for [X] days at $[X]/day after closing."

Inspection Repairs: "Seller agrees to repair items exceeding $500 per item found during inspection."

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Part 3: Writing the Purchase Offer

Now let's put it all together into an actual offer.

Using Standard Forms

Contracts Are State-Specific:

• Each state has standard real estate forms
• Usually prepared by state Realtor associations
• Your agent will prepare using standard forms
• Don't try to create your own

Key Sections in Standard Purchase Agreement:

1. Parties and Property

• Buyer name(s)
• Seller name(s)
• Property address and legal description

2. Purchase Price and Terms

• Purchase price
• Earnest money amount
• Down payment
• Financing details

3. Contingencies

• Inspection period and terms
• Financing deadline
• Appraisal contingency
• Other contingencies

4. Included/Excluded Items

• What conveys with property
• What seller keeps

5. Closing Details

• Closing date
• Where closing will occur
• Who pays what closing costs

6. Disclosures

• Seller disclosure requirements
• Lead paint disclosure (pre-1978 homes)
• Other required disclosures

7. Default and Remedies

• What happens if buyer defaults
• What happens if seller defaults
• Earnest money disposition

8. Additional Terms

• Special provisions
• Addendums
• Signatures

Sample Offer Summary

PURCHASE OFFER SUMMARY

Property: 123 Main Street, Anytown, ST 12345
Purchase Price: $205,000
Earnest Money: $5,000 (2.4%)
Down Payment: $41,000 (20%)
Financing: Conventional loan, $164,000

Contingencies:
✓ Inspection (10 days)
✓ Financing (21 days)
✓ Appraisal
✓ Clear title

Closing Date: 35 days from acceptance

Included:
- All appliances (range, refrigerator, dishwasher, microwave)
- Washer and dryer
- Window treatments
- Light fixtures and ceiling fans
- Garage door openers

Special Terms:
- Buyer requests seller to provide 12-month home warranty ($500 value)
- Seller to repair any items exceeding $1,000 found during inspection
- Closing cost contribution: Seller pays 1% ($2,050) toward buyer's costs

Offer Expires: 24 hours from presentation

Offer Expiration

Always Include Expiration: "This offer expires at 5:00 PM on [Date] if not accepted."

Typical Expirations:

• 24-48 hours standard
• Longer if holiday or weekend intervenes
• Shorter (hours) in very competitive situation

Why It Matters:

• Creates urgency
• Prevents seller from shopping your offer
• Allows you to move on if not accepted
• Professional courtesy

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Part 4: Negotiation Strategies and Tactics

Negotiation is an art. Let's learn how to negotiate effectively.

Understanding the Seller's Position

Before Negotiating, Research:

Seller Motivation Clues:

• Days on market (longer = more motivated)
• Price reductions (shows motivation)
• Reason for selling (divorce, job, financial, estate)
• Property condition (deferred maintenance suggests financial issues)
• Is it vacant or occupied?
• Recent appraisal or listing history

Ask Your Agent:

• Why is seller selling?
• How motivated are they?
• Any deadline pressures?
• Have there been other offers?
• What's most important to seller (price, timing, terms)?

Seller Motivation Levels:

Highly Motivated (Great Negotiating Position):

• Financial distress
• Divorce
• Job relocation (already moved)
• Estate sale (heirs want cash)
• Property vacant for months
• Multiple price reductions
• Long days on market (100+)

Moderately Motivated:

• Upgrading/downsizing
• Reasonable timeline
• Fair asking price
• Some flexibility

Not Motivated (Difficult Negotiation):

• Just testing market
• Overpriced
• No hurry
• Emotional attachment
• "Waiting for right offer"

Negotiation Principles

Principle 1: Everything Is Negotiable

Beyond price, you can negotiate:

• Closing date
• Included items
• Repairs
• Closing cost contribution
• Home warranty
• Rent-back terms
• Earnest money amount
• Contingency periods

Principle 2: Make Seller Feel They Won

Even if you get a good deal, let seller save face:

Bad: "You were asking way too much. My offer is fair market value." Good: "This is a great property. My offer reflects current market conditions and the repairs needed, but I think it's fair to both of us."

Principle 3: Justify Your Position

Don't just make offers—explain them:

"Mr. Seller, I'm offering $195,000, which is $10,000 below your asking price. 
Here's why:

1. The roof needs replacement within 2 years ($8,000)
2. HVAC system is 16 years old, near end of life ($5,000)
3. Comparable properties in the area sold for $200,000-205,000
4. I'm offering quick closing and minimal contingencies

My offer allows me to purchase the property, make necessary repairs, and 
still achieve a modest return. I believe this is fair for both of us."

Principle 4: Know Your Walk-Away Number

Before making offer, decide:

• Maximum price you'll pay
• Minimum terms you'll accept
• Which points you'll fight for
• Which points you'll concede

Never decide this during negotiation—emotions cloud judgment.

Principle 5: Let the Agent Do the Talking

Your Role:

• Set strategy with your agent
• Provide analysis and reasoning
• Make final decisions

Agent's Role:

• Present offer professionally
• Handle emotional aspects
• Buffer between you and seller
• Provide market expertise
• Keep negotiation moving

Don't undermine your agent by contacting seller directly or being emotional.

Negotiation Tactics

Tactic 1: The Reasonable Lowball

Make a low but defensible offer:

Asking Price: $220,000
Your Offer: $195,000 (11% below asking)

Justification:
- Market comps show value at $205,000
- Property needs $10,000 in repairs
- Your offer is at adjusted market value

Result: Opens negotiation, may meet around $205,000

Tactic 2: The Concession Strategy

Make small concessions to create goodwill:

Your Offer: $200,000, seller pays closing costs
Seller Counter: $215,000, no closing costs

Your Counter: $207,000, seller pays 1% closing costs
(You increased $7K, reduced closing cost request)

Message: You're willing to compromise, but expect seller to as well

Tactic 3: The Take-It-or-Leave-It

Works only with highly motivated sellers:

"This is my best and final offer: $195,000, as-is purchase, 
14-day close. I need a response by tomorrow at 5 PM. If you decline, 
I'll be making offers on other properties."

Risk: Seller may call your bluff
Reward: Quick deal at your price

Use Sparingly: Can backfire and kill deals.

Tactic 4: The Nibble

After main terms agreed, ask for small extras:

Agreement reached at $210,000.

You: "Great! One last thing—would you include the washer and dryer? 
They fit the space perfectly."

Often sellers will agree to small items after big agreement reached.

Tactic 5: The Silence

After making offer or counter-offer, say nothing:

• Don't justify
• Don't explain further
• Let seller/agent respond
• Resist urge to fill silence

Silence creates pressure on the other party.

Tactic 6: The Alternative

Show you have other options:

"We really like your property, but we're also considering two others. 
If you can work with us on price, we'd prefer to move forward with yours."

This is only ethical if true—don't lie about other offers.

Handling Common Objections

Objection 1: "Your offer is too low."

Response: "I understand it's below your asking price. Let me explain my analysis..." (Show comps, repair needs, investment criteria)

Objection 2: "I have another offer higher than yours."

Response: "I respect that. My offer stands as presented. If the other offer falls through, please contact me. I'm ready to close quickly."

(Either they do have another offer, or they're bluffing. Don't bid against yourself.)

Objection 3: "I need to get $X to pay off my mortgage."

Response: "I understand your situation, but I need to make decisions based on market value and my investment criteria, not your mortgage balance. My offer reflects what I can pay."

(Seller's financial needs are not your problem.)

Objection 4: "I've put $X into this property."

Response: "I appreciate the improvements you've made. Unfortunately, market value is determined by comparable sales, not by what you invested. My offer reflects current market conditions."

Objection 5: "I'll just wait for a better offer."

Response: "That's certainly your right. My offer stands for [timeframe]. If your circumstances change, I'm ready to move forward quickly."

(Then actually move on to other properties. Don't chase.)

Multiple Offer Situations

When competing with other buyers:

Strengthen Your Offer:

1. Price: Offer more (but stay within your limits)
2. Earnest Money: Increase to show serious intent
3. Contingencies: Reduce or eliminate if comfortable
4. Closing: Match seller's preferred timeline
5. Terms: As-is purchase, no repair requests
6. Escalation Clause: Automatically beat other offers

Escalation Clause Example:

"Buyer offers $200,000 and will increase offer by $2,000 above any 
competing offer, up to a maximum of $215,000. Seller must provide 
proof of competing offer."

Personal Touch: Write a letter to seller (if residential):

Dear [Seller],

We're excited about the opportunity to purchase your home at 123 Main Street. 
[Brief reason why property appeals to you]

We're pre-approved, ready to close quickly, and will treat your home with 
care. We hope you'll consider our offer.

Thank you for your consideration.

Sincerely,
[Your Name]

When to Walk Away:

• Bidding exceeds your maximum price
• Too many contingencies being waived
• Pressure to make emotional decisions
• Numbers no longer work

Remember: Winning a bad deal is worse than losing.

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Part 5: The Contract-to-Close Timeline

Once your offer is accepted, a lot happens before closing. Let's walk through the entire process.

Timeline Overview (Typical 30-35 Day Close)

Day 0: Offer Accepted
Day 1-3: Open Escrow, Order Title Work
Day 5-7: Complete Inspection
Day 7-10: Inspection Negotiation
Day 10-14: Finalize Repairs Agreement
Day 15-21: Complete Loan Processing
Day 20-25: Appraisal Completed
Day 25-28: Final Loan Approval (Clear to Close)
Day 28-30: Final Walkthrough
Day 30-35: CLOSING DAY!

Let's detail each phase:

Phase 1: Opening Escrow (Days 0-3)

What Happens:

Escrow Company/Title Company:

• Neutral third party holds funds and documents
• Ensures proper transfer of property
• Handles paperwork and money distribution

Your Action Items:

1. Deliver Earnest Money (within 1-3 days of acceptance)

   • Wire transfer or certified check
   • Goes into escrow account
   • Held until closing

2. Provide Documentation to Lender:

   • Purchase agreement
   • Any requested financial updates
   • Proof of earnest money deposit

3. Order Inspections:

   • Schedule home inspection (ASAP)
   • Schedule specialty inspections if needed
   • Complete within contingency period

Title Work Begins:

• Title company searches public records
• Verifies ownership
• Identifies liens or encumbrances
• Prepares preliminary title report

Phase 2: Inspection Period (Days 5-14)

Home Inspection (Days 5-7):

Your Responsibilities:

• Attend inspection
• Take notes and photos
• Ask questions
• Receive written report

Inspection Report Review:

• Read entire report carefully
• Identify major vs. minor issues
• Estimate repair costs
• Decide strategy

Inspection Outcomes:

Outcome A: Minor Issues Only

• Accept property as-is
• Move forward to closing
• Budget for minor repairs after closing

Outcome B: Moderate Issues

• Request repairs or credits
• Negotiate with seller
• Reach agreement

Outcome C: Major Issues

• Renegotiate price
• Request significant repairs
• Walk away if issues too severe

Inspection Negotiation (Days 8-14):

Request for Repairs:

BUYER'S REPAIR REQUEST

Based on inspection dated [Date], Buyer requests Seller complete the 
following repairs prior to closing:

1. Roof leak repair - $800
2. Replace broken HVAC capacitor - $200
3. Repair plumbing leak under kitchen sink - $150
4. Replace non-functional GFCI outlets (3) - $300

Total Requested Repairs: $1,450

Alternatively, Buyer will accept $1,450 credit at closing in lieu of 
repairs.

Response requested by [Date].

Seller Responses:

Option 1: Full Agreement "Seller agrees to complete all requested repairs before closing."

Option 2: Partial Agreement "Seller will repair roof leak and plumbing, but buyer to handle outlets and HVAC. Seller provides $500 credit toward remaining items."

Option 3: Credit Only "Seller provides $1,000 credit at closing. Buyer handles all repairs."

Option 4: Refusal "Seller declines repair requests. Property sold as-is per agreement."

Your Response Options:

• Accept seller's counter
• Counter back with compromise
• Walk away (if within contingency period)
• Accept as-is and proceed

Repair Negotiation Tips:

• Focus on major items, not cosmetic
• Be reasonable—don't nickel and dime
• Credits often better than repairs (you control quality)
• Get everything in writing

Phase 3: Loan Processing (Days 1-25)

Immediately After Acceptance:

Submit Full Loan Application:

• Complete detailed application
• Provide all requested documentation
• Authorize credit and employment verification

Documents Typically Needed:

• W-2 forms (past 2 years)
• Pay stubs (past 30 days)
• Bank statements (past 2-3 months)
• Tax returns (past 2 years if self-employed)
• Purchase agreement
• Proof of earnest money deposit
• Photo ID and Social Security card
• Gift letter (if using gift funds)

Loan Processing Steps:

Week 1-2: Initial Review

• Lender reviews application and documents
• Orders appraisal ($400-600)
• Verifies employment
• Verifies assets (bank accounts)
• Credit check

Week 2-3: Underwriting

• Underwriter examines entire file
• May request additional documentation
• Ensures you meet lending guidelines
• Calculates debt-to-income ratio
• Reviews property appraisal

Common Additional Requests:

• "Explain this $3,000 deposit in your bank account"
• "Provide letter of explanation for late payment in 2023"
• "Verify source of down payment funds"
• "Explain gap in employment"
• "Provide divorce decree"

Your Job:

• Respond quickly (same or next day)
• Provide exactly what's requested
• Keep lender informed
• Don't make major financial changes (see below)

What NOT to Do During Loan Processing:

DON'T:

• ❌ Buy a car (new debt)
• ❌ Open new credit cards
• ❌ Close credit card accounts
• ❌ Make large purchases
• ❌ Change jobs
• ❌ Move money between accounts without explanation
• ❌ Miss any bill payments
• ❌ Co-sign loans for others
• ❌ Make large cash deposits

All of these can kill your loan!

Appraisal (Days 15-25):

Process:

1. Lender orders appraisal
2. Appraiser inspects property (1-2 hours)
3. Appraiser researches comps
4. Appraisal report completed (7-14 days)
5. Submitted to lender

Appraisal Outcomes:

At or Above Purchase Price:

• Perfect scenario
• Loan proceeds as planned
• No issues

Below Purchase Price:

Purchase Price: $200,000
Appraisal: $190,000
Loan Amount: Based on $190,000 (not $200,000)

If you were putting 20% down:
Original Plan:
- Down Payment: $40,000
- Loan: $160,000

After Low Appraisal:
- Loan: Only $152,000 (80% of $190,000)
- Down Payment: Must increase to $48,000
- OR renegotiate price to $190,000

Dealing With Low Appraisal:

Option 1: Bring More Cash

• Cover difference with additional down payment
• Only if you can afford it

Option 2: Renegotiate Price

"Dear Seller, property appraised at $190,000. My lender will only lend 
based on appraised value. I request we reduce purchase price to $190,000 
to reflect appraisal."

Option 3: Meet in Middle "Seller: reduce price to $195,000. Buyer: bring extra $5,000."

Option 4: Challenge Appraisal

• Provide better comps to appraiser
• Request second appraisal (costs more)
• Works occasionally

Option 5: Walk Away

• Use appraisal contingency
• Get earnest money back
• Find another property

Week 3-4: Final Approval

Clear to Close:

• Underwriter issues final approval
• All conditions met
• Loan documents prepared
• Closing date confirmed

You'll Receive:

• Closing Disclosure (CD)
• Final loan terms
• Exact amount due at closing
• Closing location and time

Phase 4: Final Walkthrough (Days 28-30)

Purpose: Verify property condition hasn't changed since inspection and agreed repairs completed.

When:

• 24-48 hours before closing
• Never skip this step

What to Check:

Overall Condition:

• Property in same condition as when under contract
• No new damage
• Property is empty (if seller agreed to vacate)
• All included items still present

Agreed Repairs:

• Completed as specified
• Work appears professional
• Get receipts/documentation

Utilities:

• Turn on all lights (they work?)
• Run all faucets (water pressure okay?)
• Flush all toilets
• Test HVAC (heat and cool)
• Check appliances
• Test garage door

Included Items:

• Appliances present and working
• Light fixtures intact
• Window treatments in place
• Garage door openers and remotes
• All items per contract

Look For New Issues:

• New cracks or damage
• Signs of leaks
• Doors/windows function properly
• Any surprises

If Issues Found:

Minor Issues:

• Document with photos
• May request small credit ($100-500)
• Often proceed to closing

Major Issues:

• Property significantly different
• Agreed repairs not completed
• Delay closing until resolved
• Negotiate escrow holdback

Escrow Holdback:

Issue: Seller didn't complete roof repair ($1,200)

Solution: At closing, $1,500 held in escrow until repair completed 
(extra to cover if cost increases). Once repair done and verified, 
funds released to seller.

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Part 6: Closing Day

The big day! Here's what happens.

Before Closing

72 Hours Before:

• Receive Closing Disclosure (CD)
• Review all numbers carefully
• Compare to Loan Estimate (LE)
• Ask about any unexpected fees

24 Hours Before:

• Confirm closing time and location
• Arrange wire transfer or cashier's check
• Bring required items
• Confirm you have valid ID

What to Bring to Closing:

Required:

• Valid government-issued photo ID (driver's license, passport)
• Cashier's check or proof of wire transfer for cash to close
• Proof of homeowners insurance
• Anything attorney/title company requested

Recommended:

• Copy of purchase agreement
• Copy of inspection report
• Notepad for notes
• Questions you have

Don't Bring:

• Personal checks (not accepted)
• Cash (not accepted for large amounts)
• Small children if possible (closing takes 1-2 hours)

The Closing Process

Location:

• Title company office
• Attorney's office
• Lender's office
• Sometimes remote/mobile closing

Who Attends:

• You (buyer)
• Seller (separate room or different time)
• Closing agent/attorney
• Your agent (optional but recommended)
• Seller's agent (optional)

Timeline:

• 60-90 minutes typical
• Much of it is signing documents

Documents You'll Sign

The Pile of Papers: You'll sign 50-100+ pages. Here are the key documents:

1. Closing Disclosure (CD)

• Final accounting of all costs
• Review carefully
• Should match Loan Estimate

2. Promissory Note

• Your promise to repay the loan
• States loan amount, interest rate, term
• Legally obligates you to repay

3. Deed of Trust / Mortgage

• Secures the loan with the property
• Gives lender rights to foreclose if you don't pay
• Recorded in public records

4. Deed

• Transfers ownership from seller to you
• Most important document
• Makes you the legal owner
• Recorded in public records

5. Loan-Specific Documents:

• Truth in Lending disclosure
• Right to rescind notice (doesn't apply to investment properties)
• Occupancy certification
• Many others

6. Other Documents:

• Settlement statement (HUD-1 or CD)
• Affidavits (no judgments, no changes in finances)
• HOA documents (if applicable)
• Property disclosure (if not done earlier)

Signing Tips:

• Initial and sign where indicated
• Ask questions if something doesn't match your understanding
• Don't rush—read what you're signing
• Take your time
• It's normal to feel overwhelmed by paperwork

Closing Agent Will Explain:

• Each document's purpose
• Where to sign
• What it means

Understanding Closing Costs

Who Pays What: Negotiable, but typical allocations:

Buyer Typically Pays:

• Loan origination fee (1% of loan)
• Appraisal fee ($400-600)
• Credit report ($25-50)
• Title insurance (lender's policy)
• Recording fees ($100-200)
• Prepaid items:
  • Property tax reserves (2-6 months)
  • Homeowners insurance premium
  • Prepaid interest
• Inspection fees (already paid)

Seller Typically Pays:

• Real estate commissions (5-6% of price)
• Title insurance (owner's policy)
• Transfer taxes (varies by location)
• Prorated property taxes (their portion)
• Any negotiated repairs or credits
• Outstanding liens/mortgages
• Home warranty (if agreed)

Sample Closing Costs (Buyer):

Purchase Price: $200,000
Loan Amount: $160,000 (20% down)

BUYER'S CLOSING COSTS:

Loan Costs:
- Origination fee (1%): $1,600
- Appraisal: $500
- Credit report: $30
- Tax service: $75
- Flood certification: $20
Subtotal: $2,225

Title and Recording:
- Lender's title insurance: $600
- Recording fees: $150
- Settlement fee: $400
Subtotal: $1,150

Prepaid Costs:
- Homeowners insurance (1 year): $1,000
- Property tax reserves (6 months): $1,200
- Prepaid interest (15 days): $450
Subtotal: $2,650

Total Closing Costs: $6,025

TOTAL CASH TO CLOSE:
Down Payment: $40,000
Closing Costs: $6,025
Less Earnest Money: -$3,000
Total Due: $43,025

After Signing

You've Signed Everything... Now What?

Money Changes Hands:

• Your funds (cashier's check or wire) applied
• Seller's mortgage paid off
• Commissions paid
• All fees paid
• Remaining money goes to seller

Deed and Mortgage Recorded:

• Closing agent records documents with county
• Makes ownership transfer official
• Public record now shows you as owner
• Typically same day or next business day

You Receive:

• Keys to property!
• Garage door remotes
• Security codes
• Final closing package (copies of all documents)

Congratulations! You're a Property Owner!

Taking Possession

When Can You Enter Property?

• Usually after closing is fully complete
• After deed is recorded (same day or next day)
• Confirm with closing agent

First Things to Do:

Immediate (Day 1):

• Change locks (security)
• Document condition (photos/video)
• Turn on utilities (if off)
• Set up insurance
• Get lockbox for property management

First Week:

• Deep clean property
• Complete any needed repairs
• Make any improvements
• Prepare for tenant (if renting immediately)
• Set up systems:
  • Property management software
  • Accounting system
  • Maintenance tracking

First Month:

• Market for tenants
• Screen and select tenant
• Execute lease
• Collect first month + deposit

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Part 7: Common Problems and How to Handle Them

Despite best plans, issues arise. Here's how to handle common problems.

Problem 1: Financing Falls Through

Causes:

• Job loss or income change
• Credit score drops
• DTI exceeds limits
• Property doesn't appraise
• Lender finds undisclosed issues

Prevention:

• Get pre-approved (not just pre-qualified)
• Don't make financial changes during process
• Maintain employment
• Respond to lender requests immediately

Solutions:

• Try different lender
• Bring more down payment
• Get co-signer
• Renegotiate price or terms
• Walk away (if within contingency)

Problem 2: Appraisal Comes in Low

Already Covered in Phase 3 - Quick Recap:

• Renegotiate price
• Bring more cash
• Meet in middle
• Challenge appraisal
• Walk away

Problem 3: Inspection Reveals Major Issues

Examples:

• Foundation problems ($15,000+)
• Mold throughout ($10,000+)
• Failed septic ($8,000+)
• Major structural issues

Solutions:

• Renegotiate price significantly
• Request repairs (rare for major items)
• Walk away and find better property
• Accept if numbers still work

Decision Matrix:

Issue: Foundation repair needed - $18,000

Asking Price: $200,000
Your Offer: $195,000

Option A: Request $18,000 credit
- New price: $177,000 effective
- See if numbers work at this price

Option B: Walk away
- Issue too significant
- Find another property

Do NOT proceed at $195,000 unless you knew about foundation issue 
and priced it in originally.

Problem 4: Seller Can't Deliver Clear Title

Issues:

• Liens on property (IRS, contractor, judgment)
• Divorce disputes
• Ownership questions
• Undisclosed heirs

Solutions:

• Seller must clear liens before closing
• Delay closing until resolved
• Seller pays off liens from proceeds
• Walk away if can't be cleared

Title Insurance Protects You: Even if issues slip through, title insurance covers you.

Problem 5: Seller Refuses to Move Out

Causes:

• Moving delays
• Tenant won't leave
• Changed mind
• Financial problems

Prevention:

• Include occupancy terms in contract
• Charge daily rent-back fee if they need time
• Serious consequences for breach

Solutions:

• Delay closing (if acceptable to you)
• Holdback funds in escrow ($5,000-10,000)
• Legal eviction process
• Sue for specific performance
• Attorney consultation

Problem 6: Property Damaged Before Closing

Example: Seller's moving truck damages wall, tree falls on roof, vandalism occurs.

Protection: Property is seller's responsibility until closing. Seller's insurance should cover.

Your Rights:

• Refuse to close until repaired
• Request credit for repairs
• Negotiate price reduction
• Walk away (if major damage)

Final Walkthrough Catches This: Always do final walkthrough 24-48 hours before closing.

Problem 7: Seller Removes Included Items

Example: Contract says washer/dryer included; seller takes them anyway.

Prevention:

• Clear contract terms
• Final walkthrough verification
• Photos of included items

Solutions:

• Refuse to close until items returned
• Escrow holdback for item value
• Accept credit for replacement cost
• Police report if theft

Problem 8: Closing Delayed

Common Causes:

• Lender delays
• Title issues
• Document problems
• Seller not ready
• Contract corrections needed

Impact:

• Hotel costs if you're moving
• Storage fees
• Lost wages
• Stress

Solutions:

• Stay calm (delays are common)
• Stay in close contact with all parties
• Be flexible if possible
• Document extra costs if seller's fault

Your Rights:

• Depends on contract language
• "Time is of the essence" clause means strict deadline
• May be able to claim damages
• Attorney advice if significant harm

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Part 8: Key Takeaways from Module 6

Core Principles

1. Offer price combines three valuations:

   • Market value (what it's worth)
   • Investment value (what it's worth to you)
   • Repair-adjusted value (accounts for needed work)

2. Offers are more than price:

   • Terms matter (contingencies, closing date, included items)
   • Flexibility can win deals
   • Fewer contingencies = stronger offer

3. Negotiation is strategic:

   • Understand seller motivation
   • Justify your position with data
   • Make concessions strategically
   • Know your walk-away point

4. The closing process is structured:

   • Inspection period (7-14 days)
   • Loan processing (21-30 days)
   • Final walkthrough (1-2 days before closing)
   • Closing day

5. Due diligence protects you:

   • Title search
   • Inspections
   • Appraisal
   • Final walkthrough
   • Never skip steps

6. Problems can be solved:

   • Most issues have solutions
   • Stay calm and professional
   • Consult professionals when needed
   • Walking away is sometimes best solution

Your Action Steps

Before proceeding to Module 7, complete these tasks:

1. ✅ Review Standard Purchase Agreements

   • Get copy of your state's standard forms
   • Read through completely
   • Understand each section
   • Ask agent to explain unclear parts

2. ✅ Prepare Your Offer Template

   • Your typical offer structure
   • Standard contingencies you'll use
   • Your preferred terms
   • Items to include

3. ✅ Practice Comparables Analysis

   • Find recent sold properties
   • Calculate price per square foot
   • Make adjustments for differences
   • Determine market values

4. ✅ Create Closing Timeline Checklist

   • Key milestones
   • Your responsibilities
   • Document deadlines
   • Contact information

5. ✅ Understand Your Market's Norms

   • Typical days on market
   • How quickly to make offers
   • Earnest money expectations
   • Closing timelines
   • Who pays what costs

6. ✅ Get Pre-Approved (If Not Already)

   • Complete loan application
   • Provide documentation
   • Get pre-approval letter
   • Ready to make offers

7. ✅ Take the Module 6 Quiz

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Module 6 Self-Assessment Quiz

Test your understanding. Answers provided at the end.

1. What three factors determine your offer price? a) List price, asking price, sale price b) Market value, investment value, repair-adjusted value c) Appraisal, inspection, title d) Down payment, loan amount, closing costs

2. What is earnest money? a) The down payment b) Closing costs c) Good-faith deposit to show you're serious d) The total amount you'll pay

3. What is the purpose of an inspection contingency? a) To get a loan b) To allow buyer to inspect and renegotiate or cancel if issues found c) To verify the title d) To get insurance

4. Typical earnest money is what percentage of purchase price? a) 0.5-1% b) 1-3% c) 5-10% d) 10-20%

5. When should you do the final walkthrough? a) Same day as closing b) 24-48 hours before closing c) Immediately after making offer d) During inspection period

6. What happens if the appraisal comes in below purchase price? a) Nothing, proceed as planned b) You must bring extra cash, renegotiate price, or walk away c) Seller must reduce price d) Lender increases loan amount

7. During loan processing, you should NOT: a) Respond to lender requests quickly b) Buy a new car c) Keep lender informed d) Maintain good credit

8. What is an escalation clause? a) A way to back out of a deal b) Automatically increases your offer above competing offers up to a maximum c) A clause about using stairs vs. elevator d) A financing option

9. What is "clear to close"? a) The property is empty b) Final loan approval, ready to close c) Title is clear d) Inspection is complete

10. True or False: You should always challenge a low appraisal.

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Quiz Answers

1. b) Market value, investment value, repair-adjusted value
2. c) Good-faith deposit to show you're serious
3. b) To allow buyer to inspect and renegotiate or cancel if issues found
4. b) 1-3%
5. b) 24-48 hours before closing
6. b) You must bring extra cash, renegotiate price, or walk away
7. b) Buy a new car (or make any major financial changes)
8. b) Automatically increases your offer above competing offers up to a maximum
9. b) Final loan approval, ready to close
10. False - Only challenge if you have strong evidence appraisal is incorrect; often better to renegotiate or walk away

Scoring:

• 9-10 correct: Excellent! You're ready to make offers and close deals.
• 7-8 correct: Good work! Review missed concepts.
• 5-6 correct: Fair. Re-read sections about offer structure and closing process.
• Below 5: Review the entire module before proceeding.

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Conclusion: You're Ready to Buy Your First Property

Congratulations on completing Module 6! You now understand the entire process from making an offer through closing day and taking possession of your investment property.

You've mastered:

• Determining appropriate offer prices
• Structuring competitive offers with proper terms
• Negotiating effectively with sellers
• Navigating the complete closing timeline
• Handling inspections and due diligence
• Managing the closing process
• Dealing with common problems
• Taking possession of your property

This is a Major Milestone: Modules 1-6 have given you the complete knowledge to find, analyze, finance, negotiate, and purchase your first investment property. You have the foundational skills needed to become a real estate investor.

What's Next: Now that you own the property, you need to manage it profitably. The remaining modules cover property management, taxes, scaling, and long-term wealth building.

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You're ready for Module 7: Property Management Essentials.

In the next module, you'll learn how to manage your investment property, find and screen quality tenants, handle maintenance, deal with tenant issues, and decide between self-management and hiring a property manager.

You've bought the property. Now let's learn how to manage it successfully and profitably.

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"The major fortunes in America have been made in land." — John D. Rockefeller