Sunday, February 13, 2011 -
By Relocation.com Staff
Your real estate agent will generally be able to provide you a pre-printed contract, which you and the agent will customize to match your offer. The offer is really made up of a combination of price and terms. If you give on one, you can expect to take on the other. For instance, if you offer close to or exactly the asking price, you may ask the seller to pay more closing costs. If you offer is less than the asking price, you might decide to offer to pay for something else. For example, if the home needs new windows, you may offer to pay for these. Again, be specific and include everything in writing.
Read the contract carefully.
If you are unsure whether you have included everything, seek advice from your agent. In case your agent does not have the answer, seek the legal counsel of your attorney. When the offer is accepted, you cannot go back and say you forgot something. The contract becomes a legal document upon the acceptance.
When writing up the purchasing contract, remember that everything is negotiable at this stage. You may ask for everything you want, though you may not get it. Depending on whether this is a seller's or buyer's market and how badly you want the home, you may want to ask for more or less. It should now be clear that you need to include a lot of information in the contract and that you need to be as specific as possible.
The contract is divided up into sections. Here is a guide on what sections you will find in most contracts and what to include in these:
- Buyers and sellers names.
- Address and legal description of the property, i.e. as per government records.
- Names of brokers involved, if any.
- The price, down payment, loan amount and amount of the deposit.
Many people work with a lender prior to going shopping for a new home so they have an idea how much the lender is willing to loan. The lender will offer to provide a letter of pre-approval. Many buyers feel more comfortable with this when shopping for a new home. This way they stay within their price range whilst shopping. It is also a good idea to discuss this with the agent before looking for a new home. This will give you an idea what you can afford and your agent will show you homes accordingly. Remember the pre-approval is not a guarantee of a loan. You will still need to go through the approval process but it'll give you a good idea of what you can afford.
- Contingencies on which the contract is binding.
A contingency allows you to back out of the contract for a specific reason. Many buyers have the offer agent or attorney.
- Obtaining financing.
This gives the buyer a way out in the event the buyer cannot get a mortgage. You do need to be specific on the type of mortgage. However, depending on how motivated the seller is to sell, he may be able to help with the financing.
- The appraisal.
If the house is over priced, this will come to light when an appraisal is conducted. The buyer may be able to back out in the event this occurs. Also the lender may not loan funds to the buyer in this case.
- Home inspection.
If the inspection turns up a major fault, the buyer may be able to back out of the deal, though the seller usually has the option to offer to make repairs. The buyer is generally required to have the inspection performed within five to ten days after the offer is accepted by the seller.
- Clear title.
This is commonly listed as a contingency on the purchasing contract. A title search indicates there is an easement on the property. This means that somebody else is allowed to use the property permanently. It can be cleared up if the person or persons authorized to use the property signs a quitclaim deed. There also may be an encroachment on the property. This means that something you own may be on another's property or something someone else owns may be on your property. Again, a quitclaim deed may be used to clear this up if all parties involved agree.
- The sale of prior residence.
This is commonly listed as a contingency as the buyer wants to ensure they have sold their old home before investing in a new home.
- Approval by the board.
This may be a requirement for a co-op or condo.
- Time limits for a response to the offer, for getting financing, for closing and for moving in.
Again, the timelines can be listed as contingencies. If you wish to move in quickly as you may be selling your old home and already have a buyer and a closing date, you might list the sale contingent on a specific timeline.
- What personal property is included?
Remember what your idea and the sellers idea of personal property is may be different so be specific and list these items. Examples are window treatment and appliances.
- How special circumstances are handled?
For example, if the sale falls through due to no fault of yours or due to a contingency not being met, you may want to specify how and when the earnest money is returned.
- How certain payments are prorated?
Examples include taxes and homeowner association fees, which may be due. The seller may be responsible for a portion of these. Who pays what may need to be specified in the contract.
- Condition of the home at settlement.
You may want certain repairs conducted prior to closing