When you make an offer on a home, your real estate agent will create a real estate contract, also known as a purchase agreement. Before you sign this, you should make sure you understand it. This is a legally binding agreement, and you need to be certain you’ve made the right choice. So what’s really in a real estate contract? Here are the key points it will contain.
1. The Price
The price you are offering to pay for the home is a key point in the contract. This may or may not be what the seller listed the home for. Make sure your price reflects the current market trends and the condition of the property.
2. Important Dates
Your contract will include several important dates. These include:
Target date for the closing
Offer expiration date
Deadline for certain things, like the home inspection
Choose dates that are reasonable but that give you answers soon enough to make your own decisions about the purchase of the home.
3. Earnest Money
To show that you are serious about the offer, your contract will include earnest money. This is like a deposit on the purchase of the home, and the money will go towards the purchase at your closing. If you walk away from the home purchase without just cause, the seller can keep that earnest money
Contingencies are a major part of the contract, and often one that’s the least understood. These are the conditions you’re asking the seller to fulfill before you will proceed with the contract. Contingencies may include the inspection, any known repairs needed or any allowances you want to purchase items for the home or do repairs yourself. You can add any number of contingencies to the offer contract, but they do make the contract less appealing to the seller. That said, it’s always wise for buyers to make an offer contingent on inspection, as the inspection offers important protection.
5. Additional Details
Finally, the contract will include details about who pays for the various costs of the home sale, including the title insurance, closing costs, survey and inspections. It will also contain the details about how and when the utilities will change from the current owner to the new one if the sale moves forward.
Whether you are a buyer making an offer or a seller receiving one, take some time to have your real estate agent walk you through these components of the contract. Make sure you understand the document fully before you sign it. This will protect you from making a mistake on this serious and legally-binding agreement.