When dealing with real estate matters, the law is clear: EVERYTHING is in writing. The sales contract should detail 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 you’re going to buy a house without a Realtor® involved, your attorney should be able to assist you in preparing the contract offer. But if you’ve got a trusty Realtor®, you can get a form sales contract from the agent. They should be able to assist you in preparing the document for presentation to the seller, although your attorney should also review it before you sign.
Once a buyer makes a written offer to the seller, the seller has three choices on what to do:
- The contract can be accepted.
- The contract can be rejected in its entirety.
- The contract offer will be countered, with different terms.
Most of the time, the potential buyer will receive a counter offer. And same with the seller, the buyer has the same three options too.
Here are the certain things which must be included in any purchase and 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 – this is usually 30-45 days – in which to make application from a mortgage lender and get a written commitment that you have been approved for the loan. But better give yourself up to 60 days in which to finalize the deal.
- It is advisable that you make the contract contingent on your obtaining a satisfactory home inspection. After the contract has been signed, there should be at least 5-7 days to have the property inspected. You can terminate the contract and get back your earnest money deposit if you are not satisfied for any reason after you receive the written report from the inspector.
- As for the earnest money deposit, you should be able to pay this upon accepting the offer. There is no magic formula and no law dictating a certain percentage of the purchase price. You need to pay for this when you sign a contract, in order to make it a valid, legal document. 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 or the buyer is in breach of the contract, in which case the money would go to the seller. Usually, the buyer put up 10 percent of the purchase price as the earnest money deposit. However, buyers can put up more or less, so long as the seller agrees with the amount. Buyers should understand that although everything in real estate is negotiable, the earnest money should be large enough to convince the seller that you are seriously interested in going forward with the purchase.
- Finally, the “termite” letter. The contract should be contingent about this. This is a report from a licensed pest inspection company indicating that the house is free and clear of termites and other wood-boring infestation. Some contracts require the seller to obtain and pay for this report; other contracts put the burden on the purchaser. This is a critical report that all buyers should receive and be read carefully before any settlement is done. Many contingencies are time-sensitive. As a buyer, you have so many days in which to get financing and complete the home inspection. You should schedule everything in your calendar for the due dates to make sure you act on these contingencies before the time has expired. Otherwise, it will be too late and you will be legally bound to comply with the terms of the contract, and proceed to settlement.
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