No wonder, real estate is often a complicated business, even for those who are experts in buying and selling. There are so many industry-specific regulations and wrinkles you need to smooth out before you can become a happy owner of a property. You might consider hiring a realtor to help you find a dream home, not to forget the lengthy process of arranging finances, making offers to sellers, and finally getting down to the most tedious part of the entire process is the contract stage, which consumes plenty of precious time and poses complexity for a non-legal person.
With such high valued properties, so many important details must be considered, unfortunately, there is still room for costly error. Both the purchaser and seller can avoid this headache, and dispute along the way by formalizing their commercial transaction through an airtight real estate purchase agreement. This binding agreement is a key step in the real estate process that indicates the purchase price and terms of the transactions upon which parties have agreed. Interestingly, not a single aspect of the sale is neglected by the purchase contract. From identifying the address of the property to closing of cost of the deal, every nitty-gritty of a transaction is covered. The goal is to extend the protection to both the buyer and seller and ensure a smooth and transparent transaction between the parties.
Real estate purchase agreements of one state may vary significantly from another state. Somewhere, agreements are relatively brief and purely open to the negotiation process. In other regions, the agreement may be a lengthy piece of a legally binding document that makes you feel overwhelmed, as you glance at it for the first time. As you make a formal offer to buy a property, you will end up reading and filling out a bundle of forms, defining the terms and conditions of your agreement. No doubt, purchase agreements are often lengthy and contain some unfamiliar terms and concepts entirely alien to you. But what is imperative for you, either as a buyer or a seller is to fully understand the terms of the contract before signing it.
This guide features some nuanced items, you may consider including in [Your] real estate purchase agreement.
Pinpoint the Address and Parties Involved
The most important part of a real estate purchase agreement is to outline the property, which is a point of discussion between the parties. The contract should provide the exact address of the property and its clear description. Besides that, it should include the identity of the buyer and the seller of the property, or any other party involved in the transaction.
Purchasers should figure out whether they want to act as joint tenants or tenants in common and therefore must ensure that in either case the information should be recorded in the purchase agreement. Joint tenants are fortunate to enjoy the right of survivorship, which means if one tenant dies, the property is immediately transferred to the next tenant without going through the hassles of probate. Whereas, in common tenancy, each person owns a share of the property. Hence, they can be transferred conveniently to someone other than the tenant.
Price and Financing Terms
A purchase contract must include the purchase price of the property, and most importantly how the financing would be done. For example, what sources are going to be utilized to finance this deal? There are many common methods of buying a property such as full cash payment or applying for different types of loans available for the purchase of the property. It’s imperative to include the type of loan used for the purchase, details of the bank providing financing for the deal, and the amount being financed.
Warranties of Property Condition
To avoid dispute and ensure both buyer and seller are on the same page concerning the condition of the property. The agreement needs to state the true condition of the property.
In some cases, a seller might wish to extend the warranty of a part of his property in some way, the purchase agreement must spell out those details. For instance, if the seller guarantees that a facility of the property will remain functional for ten years, the agreement should include it.
Closing Date and Costs
The date of the closing of the sale should be a part of the purchase agreement. Typically, the possession of the purchased property is transferred to the buyer upon the closing date and time. The closing date is important, as it marks the day when the title of a property is transferred from the seller to the buyer.
The closing cost of the deal should also be included in the purchase agreement. It’s a practice that the buyer entirely covers the closing costs. However, subject to conditions and mutual consent of the parties, a seller may agree to pay for closing costs. Whosoever pays for expenses should have his name mentioned in the agreement.
The Bottom line
This is not an exhaustive list of the key elements that should be considered, and included in the purchase agreement, before signing. But there are several other elements typically found in the agreement that can impact both the buyer and seller. A purchase agreement must ensure to protect the interest of both parties, with disputes at bay, and ensures transparency.
If you want to avoid the hassle of reading a lengthy purchase agreement and are unsure about the essential terms of the agreement. Don’t worry! SpeedLegal can help you by automatically reviewing your agreement within a few minutes and can identify the key information as well.
For more information, please feel free to contact us.