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The Contract
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Your agent will generally be
able to provide you a preprinted contract, which you
and the agent will customize to match your offer. The
offer is really made up of a combination of price and
terms. If you give on one, you can expect to take on
the other. For instance, if you offer close to or exactly
the asking price, you may ask the seller to pay more
closing costs. If you offer is less than the asking
price, you might decide to offer to pay for something
else. For example, if the home needs new windows, you
may offer to pay for these. Again, be specific and include
everything in writing.
Read the contract carefully. If you are
unsure whether you have included everything, seek advice
from your agent. In case your agent does not have the
answer, seek the legal counsel of your attorney. When
the offer is accepted, you cannot go back and say you
forgot something. The contract becomes a legal document
upon the acceptance.
When writing up the purchasing contract, remember that
everything is negotiable at this stage. You may ask
for everything you want, though you may not get it.
Depending on whether this is a seller's or buyer's market
and how badly you want the home, you may want to ask
for more or less. It should now be clear that you need
to include a lot of information in the contract and
that you need to be as specific as possible.
The contract is divided up into sections. Here is a
guide on what sections you will find in most contracts
and what to include in these:
- Buyers and Sellers names.
- Address and legal description of the property,
i.e. as per government records.
- Names of brokers involved, if any.
- The price, down payment, loan amount and amount
of the deposit. Many people work with a lender
prior to going shopping for a new home so they have
an idea how much the lender is willing to loan. The
lender will offer to provide a letter of pre-approval.
Many buyers feel more comfortable with this when shopping
for a new home. This way they stay within their price
range whilst shopping. It is also a good idea to discuss
this with the agent before looking for a new home.
This will give you an idea what you can afford and
your agent will show you homes accordingly. Remember
the pre-approval is not a guarantee of a loan. You
will still need to go through the approval process
but it'll give you a good idea of what you can afford.
- Contingencies on which the contract is binding.
A contingency allows you to back out of the contract
for a specific reason. Many buyers have the offer
contingent on different things. Consult with your
agent or attorney.
- Obtaining financing. This gives the buyer
a way out in the event the buyer cannot get a mortgage.
You do need to be specific on the type of mortgage.
However, depending on how motivated the seller is
to sell, he may be able to help with the financing.
- The appraisal. If the house is over priced,
this will come to light when an appraisal is conducted.
The buyer may be able to back out in the event this
occurs. Also the lender may not loan funds to the
buyer in this case.
- Home Inspection. If the inspection turns
up a major fault, the buyer may be able to back out
of the deal, though the seller usually has the option
to offer to make repairs. The buyer is generally required
to have the inspection performed within five to ten
days after the offer is accepted by the seller.
- Clear Title. This is commonly listed as
a contingency on the purchasing contract. A title
search indicates there is an easement on the property.
This means that somebody else is allowed to use the
property permanently. It can be cleared up if the
person or persons authorized to use the property signs
a quitclaim deed. There also may be an encroachment
on the property. This means that something you own
may be on another's property or something someone
else owns may be on your property. Again, a quitclaim
deed may be used to clear this up if all parties involved
agree.
- The sale of prior residence. This is commonly
listed as a contingency as the buyer wants to ensure
they have sold their old home before investing in
a new home.
- Approval by the board. This may be a requirement
for a co-op or condo.
- Time limits for a response to the offer, for
getting financing, for closing and for moving in.
Again, the timelines can be listed as contingencies.
If you wish to move in quickly as you may be selling
your old home and already have a buyer and a closing
date, you might list the sale contingent on a specific
timeline.
- What personal property is included? Remember
what your idea and the sellers idea of personal property
is may be different so be specific and list these
items. Examples are window treatment and appliances.
- How special circumstances are handled? For
example, if the sale falls through due to no fault
of yours or due to a contingency not being met, you
may want to specify how and when the earnest money
is returned.
- How certain payments are prorated? Examples
include taxes and homeowner association fees, which
may be due. The seller may be responsible for a portion
of these. Who pays what may need to be specified in
the contract.
- Condition of the home at settlement. You
may want certain repairs conducted prior to closing
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