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The Real Estate Purchase Contract Previous Page | Next Page

 

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Real estate purchase contracts will vary from location to location. If the homebuyer is working with a real estate agent, the agent will probably use the standard contract that is approved by the local Board of Realtors. Since real estate agents handle the bulk of real estate sales transactions, they generally use purchase contracts that provide both buyer and seller protection.

Whether using a real estate agent or handling the purchase agreement on your own, there are a number of items listed below that should be included in the purchase agreement:

  • The full legal description of the property found on title policies, surveys, or public records in the country recorders office. The street address should also be included.
  • The amount of earnest money—a purchase offer is usually accompanied with an "earnest money" deposit. This money serves to assure the seller that the buyer is making an offer in good faith that you mean business. Because the seller will take his home off the market once a purchase offer is signed, the earnest money offer her/him some protection if the buyer backs out of the deal. The seller will weigh the offer to see if it will result in a successful sale.
  • The amount of earnest money given is totally at the buyer’s discretion. The earnest money is usually placed with a real estate broker or deposited in an escrow account. If the buyer proposes a small amount of money, the offer may not be considered. On the other hand, if the buyer deposits a customary amount of earnest money, it indicates the sincerity of the buyer’s intentions to purchase the home. If, for some reason, the buyer changes his/her mind, the seller may be entitled to keep the earnest deposit. The contract should clearly state under what circumstances this money will be counted as a credit toward the amount of money needed by the buyer.
  • The offer to purchase is usually valid for a limited time from the date of the offer. If the seller is out of town or unavailable, the buyer may want to extend this acceptance period.

The buyer should find out as much as possible about the sellers from their real estate agent. Accurate information is the key to price negotiation when making an offer. It is helpful to know if the seller is really motivated to sell the property. You should also ask the seller or seller’s agent questions about the house and property. The condition of the appliances, heating and cooling systems, roof, the electrical systems and plumbing systems will help determine if the house has been well maintained. The prospective buyer should disclose as little as possible to the seller or his/her agent. For example, the buyer can be at a disadvantage if the seller discovers that the buyer’s lease is about to expire or has expired. Enclosed is a sample Real Estate Purchase Contract. Review it for familiarity. The real estate agent will assist in filling out the contract when an offer is made. (Review the Real Estate Purchase Contract located in the Forms and Work Sheet Section of your Guide.)

Contingencies

The purchase offer may include contingencies in addition to the amount of money that you are proposing to pay for the property. Contingencies are conditional events which must happen in order for the buyer and seller to conclude the transaction. All details of the contingencies should be listed in written form on the purchase offer. Some typical contingencies include:

  • The buyer’s ability to get a specific type, amount and rate of financing
  • The buyer’s ability to complete the sale of a present home before a certain date
  • The seller’s agreement to let the buyer move in prior to closing
  • The seller’s agreement to make certain repairs
  • The items of personal property which may stay or go
  • Appliances
  • Window coverings
  • Ceiling fan



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