Traps for the Unwary in an Environment of Rising Interest Rates

In the vast majority of Financing Addenda I’ve seen — along with the Inspection Contingency, the two critical Addenda in a Purchase Agreement — the Buyer’s agent fills in the blank above with the word “market.”

When rates are stable or falling . . . no problem.

However, when rates are rising or volatile, committing the Buyer to pay “market” interest rates can be dangerous, because it removes an important escape hatch if rates spike.

The better strategy?

Adding .25% to 1% to prevailing rates at the time the Purchase Agreement is signed.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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