The Sales Contract
After you have
found the home that satisfies your requirements (or at least the most
important ones) and you've decided to make a purchase offer, it is time to
prepare an offer to purchase in writing. This is the formal presentation of
your bid to the seller.
The standard
real estate contract used in most parts of the country contains more
provisions than most buyers and sellers realize. Most of the provisions in the
sales contract are negotiable from the sales price to who pays for the
termite inspection and repairs. Until an agreement on every point is reached
between the buyer and the seller, nothing irreversible has happened. But, once
all parties have signed the contract and the buyer has given his earnest
money, both are legally committed to the sales contract.
The following
is a listing of general provisions found in a standard real estate contract
used in one metropolitan area. The sales contract in your area may be very
different, but it will be just as complex. This listing is intended to alert
you to the importance of the detailed provisions in every sales contract.
With this
perspective, you'll be more likely to read and understand every part of the
contract you will be asked to sign when buy your next home
or sell your
present one. It might also be helpful to get a copy of a standard real estate
contract from your area and take time to read it at a leisurely pace before
you buy or sell. (otherwise you might overlook important contract details
while you're wrapped up in the negotiating process.
General provisions
The
agreed-upon sales price
A street address or description of boundaries
Amount of initial earnest deposit and terms for payment of the remainder
Amount of down payment
A provision allowing the buyer to withdraw from the sale if he cannot
arrange a mortgage with specified terms and rate
A provision which can make the contract conditional upon the buyers ability
to assume the sellers mortgage
A provision for terms of seller financing, if applicable
The date the property may be occupied or possession given to buyer.
Any rent-back by seller
The date and time by which the seller must agree to the conditions of the
sale
The type of deed the seller must convey. A warranty deed is specified
A description of personal property and household fixtures to be included in
the sale
Provision for a termite inspection and subsequent procedure if the
inspection shows infestation or damage
Easement rights for utility companies or other property owners
A clause which makes the sale conditional upon a satisfactory report by a
contractor, construction or other home systems expert, and the procedure buyer
and seller must follow if repairs are indicated
Provision for payment of brokers commission
Explanation of how earnest money will be held until closing
Specifications for prorating taxes, rents, utilities, etc.
Explanation of the procedure for obtaining title insurance and what takes
place if the title is not marketable at the time of closing
Rights and responsibilities of buyer and seller if property is damaged or
destroyed before closing
If the seller has made any improvements on the home within six months prior
to closing, he must furnish proof of payment. He must also warrant that there
are no liens against the property
Unless otherwise specified in the contract, the buyer agrees to accept the
property in its present condition
Space for writing in additional contract provisions or conditions
If a city or county inspection is required for an occupancy permit, the
seller agrees to make any repairs required by the inspector.
The buyer agrees to do everything within his power to obtain financing, and
must make application by a date specified in the contract.
If the seller is financing part of the sale, there is a provision which
makes the contract conditional upon the buyer supplying him with a
satisfactory credit report
A provision which gives the real estate brokers the right to release sales
data to the Real Estate Board and use the names of the seller and buyer in
advertising and trade papers in connection with the sale.
Number of persons the purchase intends to have occupy the property
Under what conditions the contract may be assigned by the Buyer.
Contingencies for inspection/sale of home
Attorney
fees clause
Arbitration clause
Liquidated damage clause
Who pays
what: Buyer's and seller's closing costs, repairs. homeowner's Assoc. transfer
fee, etc.
Seller's
disclosure obligations, if any.
