IMPORTANT CLAUSES IN YOUR REAL ESTATE CONTRACT
Written by Benny L. Kass
I wanted to share this article I found at realtytimes.com. I am sharing this as a way for us to be informed and updated with the real estate industry. After all, real estate is an investment and we are doing our best to keep you in the loop.
You have just found your dream house and would like to buy it. What to do now?
When dealing with real estate matters, the law is clear: everything has to be in writing. Thus, you will need a sales contract, which will spell out all of the terms, conditions and special requirements you may (or will) need in order to conclude the transaction and go to closing (settlement) on the house.
If there is no real estate agent involved, your attorney should be able to assist you in preparing the contract offer. If there is a real estate agent, you can get a form sales contract from the agent. In fact, the agent should be able to assist you in preparing the document for presentation to the seller, although your attorney should review it before you sign.
Typically, the buyer makes a written offer to the seller. The seller has three alternatives:
1. The contract can be accepted;
2. The contract can be rejected in its entirety, or
3. The contract offer will be countered, with different terms.
It is rare that the seller will opt for alternatives one or two; in most cases, the potential buyer will receive a counter-offer. Then, the buyer has the same three alternatives.
There are certain things which must be included in any sales contract.
- The property must be clearly identified, preferably by street address.
- The contract must be contingent upon your obtaining financing. You should allow yourself some time -- usually 30-45 days -- in which to make an application from a mortgage lender and get a written commitment that you have been approved for the loan. Under the new Consumer Financial Protection Bureau (CFPB), it will take more time, so you may want to give yourself up to 60 days in which to finalize the deal.
- Unless you are an experienced contractor, it is advisable that you make the contract contingent on your obtaining a satisfactory home inspection. You should give yourself 5-7 days after the contract is signed to have the property inspected. If you are not satisfied for any reason after you receive a written report from the inspector, you should have the right to terminate the contract, and get back your earnest money deposit.
- How much earnest money should you put up when you sign the sales contract? There is no magic formula and no law dictating a certain percentage of the purchase price. When you sign a contract, in order to make it a valid, legal document, the buyer should put up some money as a good faith earnest money deposit. These funds will be held by the real estate broker or the settlement attorney until settlement takes or until either the buyer is entitled to a return of the deposit (because the contingencies cannot be met) or the buyer is in breach of the contract, in which case the money would go to the seller.