Real Estate Sales Contracts
“Discussion” Becomes Commitment
Once the perfect home has been found, it is time for the house buyer to take the step that makes so many of us tremble with fear: the sales contract. To take some of the mystery out of the house sales contract, we will discuss what the contract involves and the components of most housing sales contracts.
First, remember that what you are signing is a legal contract. No matter what anyone says, you are not just making an “offer“. Most sales contracts will have some paraphrase of the following: “This is a legally binding contract. If not understood, seek competent advice before signing.” To put it simply, if what is written on the contract regarding selling price and provisions is accepted by the seller, you have bought a home. Unlike other negotiable businesses, such as the automobile business, “would you take?” is defined in Real Estate by a legally binding contract backed with a monetary deposit.
What are the Components of a Contract?
Although there will be some variance based on the location of your residence, most Real Estate contracts contain most or all of the following items:
THE SALES CONTRACT: WHAT IT INCLUDES
1. What: A legal description of the property as well as the street address.
2. How much: The selling price.
3. Mortgage contingency: Subject to obtaining a mortgage (if applicable) and the specifics of the mortgage–amount, rate and term. Application to be made in X number of days.
4. Deposit: How much money accompanies the contract and who will hold it.
5. Closing: When and where.
6. Inclusions and exclusions: What is and is not included in the sale of the property.
7. Home inspection: Contingency for and to be done in X number of days.
8. Warranties: Any that are included with the house and description of the warranty.
9. Condominium: If the property is a condo, other provisions will apply.
10. Well and Septic: If applicable, they must be tested (and pass).
11. Termite and Pest inspection: Who will pay and if there is infestation or damage, who will repair.
12. Possession Date: When the buyers take possession of the house–before, at or after closing.
13. Acceptance: How long the sellers have to respond to the offer with either acceptance or a counter-offer.
14. Arbitration: Any provisions for arbitration of disputes.
15. Insurance: Whose insurance covers the property up until the closing date.
16. Property Disclosures: Notices of any property disclosures concerning the house.
The exact wording of the sales contract will vary from locality to locality (and sometimes even within localities), but by being prepared to see at least the items listed above, you will be in a better position when it comes time for the Agent to ask for your signatures!