Key Points in Purchase Contract
Home buyers who haven’t bought or sold a home recently are often surprised by the complexity of today’s purchase offers.
Gone are the days of the one-page purchase contracts. Many of today’s purchase offers are five pages long and some are much longer. Verbal offers to buy real estate aren’t binding for either the buyer or the seller, so your offer should be in written form.
The written offer is usually drafted by your real estate agent or attorney.
Most buyers think simply in terms of the price when they decide to make an offer. But the price is just one of a myriad of details that make up the purchase contract.
- Typically an offer will specify the following:
- The deposit amount;
- The mortgage and down payment amounts;
- The closing date;
- The occupancy date;
- An itemization of what is included in the sale;
- Time periods for performing the contingencies;
- An itemization of who pays for fees associated with the sale.
- Who is responsible for complying with any point of sale ordinances (such as installing smoke detectors).
In addition, the purchase contract may include optional clauses, such as an arbitration clause for dispute resolution, or a liquidated damages clause to limit damages that can be awarded to the seller if the buyer breaches the contract.
You may be wondering why you have to make so many decisions before you and the seller have even agreed on a price. Price, while important, is not the only consideration.
For example, a full-price offer might not be acceptable to the seller if it is contingent on the buyer selling his home. The seller needs to know all the terms and conditions of the buyer’s offer before he can decide if the offer is acceptable. This is why all the terms and conditions that will affect the purchase transaction are encompassed in the offer.
If the offer is accepted by the seller, or if it’s countered by the seller and then accepted by the buyer, it is legally binding on both parties.
Acting quickly when you see a home you want to buy can make the difference between getting it or losing it to another buyer. The real estate market doesn’t stop while you decide whether you want to buy a property or on what terms. So offers are often written hastily.
To prepare to make an offer, ask your real estate agent or attorney to give you a sample copy of the purchase contract. Read it over, and if there’s anything you don’t understand, ask for an explanation.
Too often, buyers don’t read the contract in advance. They’re rushed when they do finally make an offer, and they don’t take the time to read the contract while they’re in the midst of making an offer.
Ideally, no matter how rushed you are, you should sit down with your agent and review the contract. Together you can decide on the specific terms you want to include in the contract. Be sure to leave yourself enough time so that you fully understand the contract before you sign it.
Sometimes time and distance don’t permit a buyer to sit down with an agent to write an offer. In this case, the offer may have to be put together using a combination of phone and fax. This process will be easier if you have reviewed the contract in advance.
Dian Hymer is a syndicated columnist and the author of “Starting Out, The Complete Home Buyer’s Guide,” (Chronicle Books, Revised 1998.)