You saw a home that you want to make an offer on.  You are excited but nervous at the possibility of buying a home and your realtor says that if you wait the house may be sold to someone else.  He wants you to sign a binder to show the owner you are interested and not lose the house so he fills out a binder agreement for you to sign.  How can you protect yourself and make sure that the offer will be presented properly.  The best way is to go over it with your attorney BEFORE you sign but if that is not possible make sure that you understand the terms before you sign.  Always add the words “SUBJECT TO ATTORNEY REVIEW and ENGINEER INSPECTION” to the binder to allow your attorney to change or cancel the binder.  Remember signing a binder agreement is a major step towards purchasing a home and if not done correctly it could be construed that you were not negotiating in bad faith.  So before signing a binder here are 5 things to discuss with your attorney before you sign a binder

1)    IF I SIGN A BINDER CAN THE SELLER SELL TO SOMEONE ELSE?
2)    SHOULD I GIVE THE BROKER A DEPOSIT?
3)    DO I HAVE TO GIVE MY WHOLE DOWN PAYMENT ON CONTRACT?
4)    CAN I CANCEL IF MY ENGINEER INSPECTION GOES POORLY?
5)    IF I DON’T GET A MORTGAGE DO I GET MY MONEY BACK?
6)    CAN I MAKE SURE MY OFFER IS PRESENTED TO THE SELLER?
7)    IF I CHANGE MY MIND CAN I GET MY MONEY BACK?

1)    IF I SIGN A BINDER CAN THE SELLER SELL TO SOMEONE ELSE?- YES
To call a binder agreement binding is a bit misleading.  Most times the binder is used to present an offer from the buyer to the seller and is not binding until a contract is signed.  The signed binder is used by the attorneys to draft the contract.  Only after the contract is signed by both parties is the deal secure and binding.

2)   SHOULD I GIVE THE BROKER A DEPOSIT? – NO
Some brokers ask for a deposit of $500-$1000 to show your good faith.  Unfortunately if the deal does not happen the money becomes an administrative fee and the buyer does not get it back.  A buyer should not give money on the house until she signs the contract with her attorney.  Be wary of any broker who asks a buyer for a deposit on the binder and make sure you talk to your lawyer before giving the broker any money.

Part II –  7 Questions to Ask Before You Sign a Real Estate Binder