Don't let the little things cost you big.
- financing contingency
- home inspection
- home sale contingency
- clear title
- return of earnest money
Although you may be told that the contract you're about to sign is "standard and customary," remember that nothing is standard in real estate law! No two situations are alike. There are exceptions to everything and many subtle local and regional nuances. Think of the contract as the blueprint for the entire transaction most everything is determined at this time. The contract itself can't hurt you, until you've signed on the dotted line. After all, we're talking about a legally binding document, so it's in your best interest to make sure the complex details of the contract aren't left out or written in a way that puts you at a disadvantage.
If there's a dispute with the seller and your contract isn't drafted properly, your hard-earned deposit could be at risk and you could be forced to accept a resolution you don't like.
Here's what your purchase contract should include:
- Purchase price: it may not be your final offer, but it should be realistic given the recent selling prices of homes comparable in terms of age, size, condition and location.
- Full names of buyers and sellers, plus their marital status
- Address and proper legal description of the property: uses real estate lingo such as "plats" and "tracts" to pinpoint the property's exact location
- Earnest money deposit a.k.a. "good faith" money, usually 3% to 5% of the purchase price; placed into an escrow account after the home inspection contingencies have been met; do not give the money to the seller!
- Closing costs and who pays them
- Amount of commission paid to real estate agent(s)
- Bill of sale that describes and itemizes any exchange of personal property, such as window treatments or appliances
- Date and place of closing
- Date the seller will vacate the home
- Responsibility for payment of utilities until you take possession
- Any contingencies (conditions):see below Contingencies: the nitty, the gritty, the necessary.
You can lose a lot of money over the "minor details" if they're not clearly written into the contract as contingencies, or conditions under which you will buy the home. Who pays for what the home inspection, repairs, closing costs, etc., is determined by regional or local customs. But there's no law that dictates one party must pay for certain procedures. By the way, oral agreements are generally not enforceable in Florida. So if the sellers told you they'd leave behind the porch swing, be sure it's specified in the contract. No "standard" contract will automatically include every provision specific to your needs and requirements they must be added. Insert any contingencies (or "escape" clauses) within the contract, including:
- Financing contingency. This makes the deal dependent upon your receiving the mortgage you're applying for, specifying cancellation rights and return of earnest money deposit if you can't arrange adequate or acceptable financing
- Home inspection. If you are not satisfied with the home's inspection report, this clause covers your right to force the seller to make repairs and/or lower the price of the home or you can opt out of the contract.
- Home sale contingency. Allows a specific timeframe for you to sell your current home.
- Clear title. The seller has to give you a clear and marketable title to the property.
- Return of earnest money. Should the transaction collapse through no fault of your own i.e., you don't get the loan or the seller can't or won't meet one of your contingencies this clause says you get your deposit money back.
- Liability for fire or other hazards. If something happens to the house after the contract has been signed but before you actually move in, this clause protects you from liability.
Let the negotiating begin. As we've said before, it would be nice if the sellers accepted your offer just as you propose it. But more than likely they will counter-offer, making adjustments to the price or dates or contingencies. Find out more under Negotiation.