7 Must-Have Real Estate Contract Conditions
Most people are not financially secure enough to make an all-cash offer on a home - and chances are, you are one of them. That means you will have to take out a mortgage loan. But before you draw up a purchase offer, make sure you research the rate of interest environment, and where you fit into the scenario. Your purchase offer should only contingent upon obtaining financing at a specified rate of interest.
The last but not the least, here's why. If you know you can not afford the monthly payment on the house if the interest rate is higher.
If you need to obtain a particular type of loan to complete the realestate deal, such as an FHA or VA loan, you should specify this in your agreement. If you are paying whole payment for the property at once, you should state this as well because it makes your offer more attractive to the seller. Why? If you do not have to get a mortgage, the deal is more likely to go through, and closing is more likely to happen on time.
If you want the seller to pay part/all of the closing costs, you must ask for it in your contract. Closing costs are typically expenses above the property price that both sellers and buyers pay to execute a real estate deal.
When you put in a concession for a seller assist, you are asking the seller to cover some of the additional expenses.
Who Pays Specific Closing Costs
The contract should specify whether the seller or buyer pays for each of the common fees associated with the home purchase, such as escrow fees, title insurance, title search fees, notary fees, transfer tax, recording fees, and more. The real estate agent can advise you as to who generally pays each of these fees in your area—the seller or buyer.
Unless you buy a tear down, you should include a home inspection contingency in your contract. This clause allows you to walk away from the deal if a home inspection reveals significant and/or expensive to repair flaws in the structure's condition. These are handled based on where you stay— Each states and cities have different real estate laws that deal with home inspection.
Fixtures and Appliances
If you want the dishwasher, refrigerator, oven, stove, washing machine, heater or any other appliances and fixtures, do not rely on a verbal agreement with the seller and do not assume anything. The contract must specify all the additions that are negotiated such as fixtures, appliances that are to be included in the purchase.
How much time do you need to complete the purchase transaction? Common time frames are 30, 45, and 60 days. Issues that can affect this time frame normally include the seller's need to find a new house, the remaining term on your lease if you currently rent, the amount of time needed for you to relocate if you move from a job, and so on.
Occasionally, the buyer or seller may want a closing as short as two weeks, but it's difficult to remove all the contingencies and obtain all the necessary paperwork and funding in such a short period of time.
Sale of Existing Home
If you are an existing homeowner and need the funds from the sale of that home to buy the new property, you should make your purchase offer contingent upon the sale of your current home. You should also provide a reasonable time frame for you to sell your home, such as 30 or 60 days. The seller of the property you're interested in is not going to want to take his property off the market indefinitely while you search for a buyer.
There are many other things that go into a thorough real estate contract, but for the most part, you shouldn't have to worry about them. Real estate agents commonly use standardized, fill-in-the-blank forms that cover all the bases, including the ones described in this article.
The Bottom Line
Even though these real estate agreements are common and standardized, and a good real estate agent would not let you leave anything important out of your agreement, it is still a good idea to educate yourself about the essential components of a real estate purchase contract.
Although it is never easy to walk away from a home—especially if your heart is set on it—there may be instances where you'll have to do just that. Remember, if any of the contingencies put forth in your contract are not met, you can cancel the deal and keep your deposit—all without spending anything other than time. The conditional agreement, you'll find, is one of the most important assets you'll have in any real estate deal.