Buying a home can be an intimidating process at times. However finding your dream home can make it all worthwhile. Of course, you and your agent will eventually need to submit an offer via a purchase contract. This document is approximately a dozen pages or so of legalese that specify the terms of your offer. Although much of the verbiage in this contract is standard for any contract, there are many areas that you and your agent will customize for your specific offer to purchase the property. We discuss some key areas to look for in the contract in the section below.
Key items in the contract
- Purchase price: Of course, the area that receives the most attention in any contract to purchase a property is the purchase price. In addition to the overall purchase price, you will also want to be sure to confirm that the initial deposit and any additional deposits are reasonable. In addition, adding up these figures along with the amount being financed is a good idea as well.
- Financing: Unless you are purchasing the property with cash, you will need to fill out the financing section to reflect how it is that the transaction will be funded. If your seeking VA or FHA financing, that will need to be specified in the contract. Of course, if you are able to pay for the property in full with cash, your offer will undoubtedly stand out as more appealing to the seller.
- Home inspection: This is an important section of the contract as it dictates the amount of time that you as the buyer has to properly inspect the property to find any latent defects or other issues. The good news for the buyer is that this specified period of time allows for you to ultimately decide whether or not you would like to proceed with the purchase. The inspection period is typically between 7 to 10 days, but this length of time is specified in the home inspection section of the contract. It is possible that a seller may counteroffer your initial offer with a reduced inspection period time.
- Closing costs: Closing costs are typical fees that are part of any real estate transaction. These fees consist of escrow, recording, title search and notary fees, transfer tax and title insurance. It is important that the contract clearly stipulates which party is responsible for which expense. In addition, it is important to note that closing cost responsibilities may vary from county to county.
- Closing date: The closing date is the date which is determined in which the conveyancing of ownership officially takes place. As the buyer, you may want to consider utilizing verbiage for the closing date such as “on or before” a specified date. This may provide you more flexibility in the event that you are considering trying to close earlier. Of course, it is important to remember that there are many items that may hold up the proceedings. Therefore, it is important for your real estate agent to remain in constant communication with the seller’s real estate agent, the lender, underwriter, attorneys and title company. As you can imagine, there are many opportunities for delays to occur but proper communication and follow through can greatly reduce the likelihood for any delays to occur.
- Additional terms: One last section of a purchase contract that is significant is the additional terms section. This section is typically found towards the end of the contract and is utilized for any unique circumstances. Since it is always recommended to have a real estate attorney representing the buyer in any transaction, it is a good idea to have your real estate attorney review any free text in this section.
Summary
More than likely, you will be using a standard real estate contract for your purchase. However, it is critically important to have a knowledgeable real estate agent and real estate attorney on your team. In doing so, you will gain a better understanding of the process and terms of the contract. In addition, the proper representation will greatly improve your chances of preventing costly mistakes throughout the process. There are many ways in which a real estate transaction can turn sour and by having a knowledgeable team, you should be able to avoid these pitfalls.
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