There may be no such thing as a perfect real estate purchase contract
There may be no such thing as a perfect real estate purchase contract, but getting this legally binding document right will save you money, time and heartache.
There are no stupid questions when it comes to buying real estate. An important time to ask them is when you are drafting the terms and conditions of your offer in the purchase contract, whether you are doing it yourself or with an agent or attorney. Curious about contingencies? Ask. Fuzzy about fixtures? Ask again. You don't have to become an expert in real estate jargon and practice to craft a perfect contract. The more you know about how a contract works, however, the more effectively you can tailor it to your desired specifications. You'll also be a much savvier negotiator when the seller comes back with a counteroffer.
Read the fine preprint
Many residential purchase contracts are crafted with standard real estate boilerplate. Many firms, in fact, use preprinted forms. While preprinted or computer-stored forms have improved the efficiency of the home-buying process, it can be at the expense of the buyer. So it pays to get a copy early on of the contract you're likely to use. Read it and don't hesitate to rewrite or toss out what you don't like. If you'll be working with a pre-print, get a copy when you first start looking for a house and highlight terms or conditions you like or may want to modify when you're ready to make an offer. Circle what you dislike, too; it's a good way to catch buyer-unfriendly fine print. After that, you're ready to sit down and write an offer you hope the seller won't refuse.
What every contract should have
Whether you're writing your own contract or using a preprinted form, every contract should have between 10 and 20 basic elements. These include the address of the property, contingencies, financing terms, purchase price, closing date and others.
Other musts include:
* Time to respond: Specific amount of time for seller to answer your offer. Contingencies also should set time limits.
* Seller’s responsibilities: Include passing clear title to the property, maintaining the property in its present condition until closing, making any agreed-upon repairs and delivering the property clean and free of personal possessions and debris.
* Disposition of deposit: Who gets your good-faith deposit if contract is terminated. Varies with circumstances, such as failure to get loan approval (seller would get deposit) or unsatisfactory home inspection (buyer would get deposit).
* What stays: What fixtures and personal property is included in the sale. Make your list detailed; any verbal agreements are not binding.
* Terms of withdrawal: What conditions allow you or the seller to withdraw from the agreement. You might not think you'll need them, but it's good protection.
* Final walk-through: Your chance to make sure the house is in order shortly before closing. Contract should specify seller's responsibility should walk-through be unsatisfactory.
Problem solving
As much as possible, your purchase contract should help you and the seller resolve any issues that crop up. For example, your interest rate is only good for 60 days and the seller indicates they may not be able to close in that time. One solution would be to include a provision in your contract that sets a firm closing date and allows the sellers to rent back to you at a cost equal to your monthly payment. Despite your best efforts, you may find yourself in court--for example, if you or the seller withdraws from the contract for a reason not in the contract. The seller might be able to sue you and you probably would lose your deposit. You also could sue the seller, either for damages or for specific performance. If you win a suit for specific performance, the court will require the sellers to abide by the purchase contract.
Protect yourself from defects
Defects that surface after closing can be a problem. Most real estate purchase contracts include a seller warranty clause. Although the clauses vary, they usually require the seller to deliver the property to the buyer with a watertight roof and with the operating systems of the house (plumbing, electrical, heating, cooling, built-in appliances) in working condition. The clause also may require the seller to disclose known defects.
Never a remorseful buyer be
Do not enter into a binding contract to buy a property unless you are sure you want to buy it. Even though contingencies are included in a purchase contract to protect you, your deposit could be at risk if you fail to complete the purchase. Few sellers will be willing to include a contingency that permits the buyers to back out risk-free if they are simply suffering from buyer's remorse.
A seller's out button
An escape clause, also called a release or kick-out clause, is a provision in a purchase contract that gives the sellers the opportunity to cancel the contract under certain conditions. Escape clauses are most common in purchase contracts contingent on the sale of the buyer's property.
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