A purchase contract is an agreement that outlines the terms of a real estate transaction. It’s intended to make sure that the buyer and seller are on the same page and to protect the rights of everyone involved in the deal.
Information on the Property in Question and the Parties Involved
The purchase contract will provide the address and a legal description of the house and the names of the buyer(s) and seller(s). The document will include a detailed list of which items, such as appliances, light fixtures,and furniture, are and aren’t to be included in the sale.
Terms of the Deal
The purchase contract will include the agreed-upon sale price and information on how the buyer plans to cover it. That may include a combination of a down payment and a mortgage.
The contract will also explain how much the buyer must provide in earnest money to confirm the intention to purchase the property. It will stipulate under what circumstances the buyer may be entitled to a refund of the earnest money and when the buyer may forfeit the funds and the seller may be allowed to keep the earnest money.
Both parties may require that certain conditions be met before the sale can be finalized. For example, the contract should include an inspection contingency. If major problems, such as a leaky roof, termite damage or lead paint are found, the seller may be required to make repairs or the buyer may have the option to walk away.
A buyer may include a contingency stating that the transaction will only proceed if the property appraisal is in line with the sale price. The contract may also contain language stating that the sale will only go forward if the buyer can obtain financing through a specific type of loan and at a maximum interest rate.
Sometimes a title search uncovers problems related to legal ownership of a property or liens for back taxes and other debts. The contract should state that any title issues must be resolved prior to sale.
The purchase agreement should specify under what conditions each party has the right to cancel the contract. If one party fails to meet an obligation, the other party may have the right to walk away.
The purchase contract should include an anticipated closing date. That date is not set in stone since an unforeseen problem may lead to a delay. The contract should include information on the amount of closing costs and who (the buyer or seller) will cover each fee. In addition, the agreement should address matters such as property taxes and prorated expenses that will be due at closing.
Talk to Your Real Estate Agent
The purchase contract will include many key conditions involved in your transaction. It’s important to understand all the terms. Discuss your priorities and contingencies with your agent before the contract is drafted and make sure that you understand everything before you move ahead.