Dissecting The Purchase Contract
Buying your first home is one lifes biggest events
. The simple magnitude of the dollars involved and the length of the mortgage commitment can be daunting. And few exercises can be as stressful as looking for and finding the right property. But, once the search through the endless stream of potential properties yields the needle in the haystack, the diamond in the rough, the proverbial jackpot at the end of the rainbow, it becomes time to actually execute the transaction and get the deal done. I personally remember being in the room when my wife and I were making this grand acquisition, but I dont remember anything that was said, I just remember signing and initialing paper after paper as if I were trying to initial every scrap of paper at a ticker-tape parade! So, as an act of mercy, Ive put together the following notes on the various clauses and conditions of the sales contract so it doesnt sound as if the attorneys are speaking Kilingon during the closing.
Sales contracts are binding legal documents, period. Ignorance is not an excuse when, after the contract is signed, you realize you didnt understand what the fine print, the terms and conditions, actually meant. This fact can be scary, there is no fudge factor allowed, so it is important that you take steps to make certain that everything in your sales contract is factual and completely accurate prior to signing.
What the heck are all those Roman Numerals for?
Your sales contract is a document that is really a series of clauses, each of which is essential to the sales process. Each clause will include several key pieces of information that are required for a full and clear transfer of the title. In order be less confusing, I have compiled this list of items that are common to most sales contracts:
* Legal Description - The first and most crucial part of any sales contract is a thorough and a completely accurate description of the target property. This is required to identify the exact boundaries of the property in question. Even in the rare case when there is a numbering change or a street name is changed, the legal description cannot be changed unless a portion of the property is subdivided and sold. This is often not even possible.
* Sales Price - The sales contract is not legally binding unless it includes the agreed upon sales price. The price and payment portion of the contract should include details such as the escrow amount, the down payment amount, mortgage loan information and earnest money deposit. Any contingencies should be included as well, often listed on a separate addendum.
* Closing Details - The closing is the grand event when the purchaser and the seller consummate their meeting of the minds and finalize all of the paperwork and complete the sale of the property. A closing agent, usually a lawyer or title company is some states, will usually orchestrate the proceedings and mange the details. So, the sales contract should also contain the location, date and time of the closing.
* Miscellaneous Inclusions and Exclusions Negotiated agreements pertaining to non standard items (such as appliances or furniture), needs to be included in the sales contract. Also detailed should be any items that will not be included in the sale. (Note to self* -List EVERYTHING that is to be included in the purchase. Dont miss a chandelier or lamp. I hate when a $129 dollar item has been removed that the buyer thought was included.)
* Warranty Information - Any warranties should be itemized in the sales contract, along with dates and descriptions.
* Testing Certification - In most cases, except in as is sales, such things as wells, septic tanks, and termite and pest inspections on the property must pass inspection before a sale can be completed. The sales contract should itemize the particulars of these items and whose responsibility it will be to pay for the inspections and any necessary repairs.
* Date of Possession - The exact date that the buyer will take possession of the home. This date can be at any time before or at the closing or even after the closing.
* Expiration Date of Offer - The contract needs to include an expiration date for the offer, by which time the seller must respond with either an acceptance, rejection or counter offer.
* Arbitration Agreement - An arbitration agreement is sometimes included to allow for mediation of any disagreements to take place outside of the legal system.
* Interim Property Insurance - The property must be insured at all times, and the sales contract should have details about who is responsible for maintaining the property insurance prior to the closing date.
Working diligently with your real estate agent, who will probably handle the preparation of your offer with a state approved Sale & Purchase Agreement, will eliminate most of the issues purchasers may have with the process of preparing a sales contract. Real estate agents are schooled in negotiating such specific details as are necessary and will be actively instrumental throughout the process.
by: Bill Fulton
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