The Terms Which
Are Encountered In
Real Estate Purchase Contract
Buying a home involves learning the language of the real estate market. It is particularly important to get up to speed if you are seriously shopping for homes and are close to submitting offers.
Purchase offers are legally binding contracts. Each state has its own real estate laws, and local real estate boards use various standard forms.
Ask your contracted buyer’s representative to give you a copy of the standard contract so that you can review it before searching the home. With this you can be familiar with the legal terminology and can ask questions before you find a home that would you like to purchase.
Here are the 10 most common terms:
Price
In all real estate contract terms, the purchase price of it may be easy to understand and also hard to agree with it. If the seller has been asking too much relative to a recent comparable sale, your buyer’s representative may suggest attaching a report that helps defend your offer price.
Also, the seller may be willing to accept a lower price if you include other desirable terms in your offer, like a quick closing date or an all-cash purchase.
Closing Date
The proposed date- When the ownership will be transferred to the buyer is called the Closing date.
This is an essential contract term that keeps both parties on track to fulfill their obligations which include unexpected delays for completing inspection repairs or finalizing financing, etc.
The purchase agreement includes provisions for situations when the buyer or seller cannot potentially meet the closing date, including penalties. It is also possible that the sale may be canceled.
Inspection
Typically, Buyers have ten days to conduct a professional home inspection when the seller accepts their offer. Your buyer’s agent can make recommendations, but it is your responsibility to appoint an inspector.Depending on the findings in the inspection report, you may need to negotiate repairs with the seller or agree to an adjustment in the purchase price.
Financing
Your purchase may be contingent on obtaining funds from a mortgage company. This section of a real estate contract satisfies key conditions of your mortgage commitment, such as the size of your down payment and the type of loan.
Typically, sellers prefer large-paying down payments or those who have already received pre-approval (which are stronger than being pre-qualified). These differences can be especially important in situations where you are competing with other buyers.
Attorney Review
Real estate professionals are not licensed to practice law but are allowed to help home buyers (or sellers) enter into real estate contracts. That’s why most real estate contracts include attorney review clauses. This gives both parties time to secure an attorney’s review and they can potentially cancel the contract under specific provisions.
Disclosures
Sellers are required to complete property disclosures that reveal various defects or improvements that may affect the condition of the home. Required disclosures vary by market, but common examples include disclosing the presence of lead-based paint, asbestos, or other environmental hazards.
Disclosure documents are usually given to buyers after the seller has accepted your offer. In some cases, you can get them before submitting the contract. Either way, buyers must sign all disclosures.
It is best for the seller to reveal everything about a home upfront because the transaction because transactions are less likely. Also, you may be able to take legal action against the seller after closing if they lied on their disclosure forms.
Escrow of Earnest Money
As a buyer, you have to show the sellers that you are seriously interested in purchasing your home by depositing the earnest money (also known as a good faith deposit) into an escrow account.
Your buyer’s representatives can advise you at local market conventions, but as a rule, the earnest money is 1% to 2% of the total domestic purchase and applies to your down payment at closing.
Your purchase contract should determine where your escrow deposit will be (usually a title company or real estate broker) and how much you will be refunded upon closing under different terms of the transaction.
Adjustment at closing
This section of a purchase contract outlines any modifications to the property’s purchase price to accommodate the payment of property taxes, utilities, municipal assessments, association fees, etc.
For example, if the seller made a semi-annual property tax payment two months before closing, the buyer will need to “reimburse” the seller for the remaining four months.
Title Insurance Affidavit
An affidavit of title is a document proving that the seller is the owner of the property and can legally give you ownership. This helps ensure that there are no claims against the property, such as a mechanic’s lien, which can occur when the seller hires someone to complete the work at home but does not pay them.
Other Addendums
Additional terms and conditions beyond the general forms can be added to a real estate purchase contract as an addendum.
Typically, this is where you request personal property to be included, ask for a home warranty, request information about the property’s homeowners association, or make other stipends.
As a buyer, it is necessary to ensure that you clarify all the terms and conditions of your purchase. At the same time, you will need to balance these requests against your desire to successfully negotiate a purchase with the seller.