Before you can call yourself a real estate owner or even attempt to move to a newly acquired place, there are some details you need to iron out first and foremost. Some of these include hiring a qualified house agent to help you hunt for that perfect building and making an offer to buy the building. And lastly, signing the purchase contract for the building to become yours.
Although all of the steps we just mentioned here sound straightforward. But in reality, they are challenging, particularly the contract signing part. This is because, unlike other processes, you will hire someone to do them. But you will do that all by yourself regarding contract signing. And since we all know how complicated the real estate business is, it is no surprise that quite many people often get it wrong when signing a real estate purchase or lease contract.
What is a Real Estate Purchase Contract, And Why is it Important?
A real estate purchase agreement is something you can’t do without because this agreement will legalize your ownership of a particular place or building. And most importantly, the agreement will also protect you and the seller. A typical real estate purchase agreement will show the prices (all the amount spent in acquiring the place) and terms for real estate transactions.
5 Items to Include in a Real Estate Purchase Contract
Before we talk about the items you need to include in a real estate purchase agreement, there is something you need to understand first. The contents of a typical Purchase agreement are not the same everywhere. Some states consider the agreement to be a fully legally binding contract. While in some other states, the agreements are only there to open up the negotiation process.
· Identifying the Address and Parties Involved
A typical purchase agreement must show the exact address of the property and the parties involved in the transaction (you and the seller). The address of the property, the parties, and the agreement must include a full description of the seller and buyer.
Also, as a buyer, one of the biggest mistakes you can ever make is not to specify the kind of tenant you want. You may decide to act as joint tenants or tenants in common. The former will give you survivorship rights – without needing probate; the property will get passed on to another surviving tenant when you pass on. Conversely, the latter means that each tenant will own a share of the said property.
However, you must include whichever you want in that agreement before you and the seller signs the contract.
· The Price and Terms of The Property Must be Included
Another important thing that must appear on the real estate purchase contract is the selling price and how much money will be paid. There are various payment methods a buyer can use. For example, you can pay in full with cash – this is one of the commonest ways people pay. However, you can pay through cash down payment if you are short of cash now. Lastly, you can take a mortgage to pay for the property. Irrespective of the one you opt for, it must be written on the purchase contract and signed.
Another thing to note is that a purchase contract often includes earnest money requirements. The purpose of earnest money is to confirm the contract. The price can vary depending on the seller and the property type, but on average, the earnest money is often pegged at $1,000.
· The Basic Legal Requirements
Also, before a real estate agreement can become legal, it must show that:
- The seller is the rightful owner of such property.
- The seller is of legal age.
- He/she is in the right frame of mind before signing the contract.
All these must appear in the contract before the parties (buyer and seller) sign the documents.
· Disclosing Health Risks and Defects
In some states in the United States, it is a crime for any property owner to intentionally withheld information about the condition of the property he is about to sell. In New York, for example, if a seller intentionally withheld the state of the property he is about to sell, he will be liable for any damages that the defects cause. He could be jailed or be asked to pay a huge fine.
Therefore, before you sign any purchase documents, ensure that the seller lists or discloses information about the property’s state. For a building, the seller must discuss all the information about the state of the wells, paint, roof and roofing sheets, etc.
· Home Inspection
One thing that many people often overlook is the importance of a home inspector. As the name implies, the role of a home inspector is to come down to your newly acquired place to check for structural defects or damages. A home inspector will also check the house’s electrical system, paint, etc. If the inspector is satisfied, you can proceed to buy the property. But if he does not, you will be advised to walk away.
Before you sign the purchase contract, including a home inspection clause in your offer will allow you to hire a home inspector to thoroughly check the property to determine if it is worth the investment you are about to make.
Note that most contingency contracts often come with home inspection clauses. But for whatever reason, yours doesn’t have, then don’t hesitate to check with your realtor.
Conclusion
Now that you know how crucial a purchase contract is, it is now more important than ever that before you draft a purchase agreement, you should discuss with a competent attorney what you should include in the agreement and what you should not.
