Making an offer on a house can be an exciting, yet scary time for any soon-to-be homeowner. One of the most confusing aspects of purchasing a home is going through all of the contracts and paperwork necessary for the transaction. The purchase offer agreement is one such document that should give you pause.
In addition to obvious terms, such as the purchase price and amount of down payment, every real estate purchase contract should include the following terms and conditions:
- Finance Terms
Usually, when you put an offer on a house, you already have preliminary financing available to purchase the home. However, because this funding is introductory, it is possible that you may not get as much as you wanted or an interest rate that fits your needs. As a result, it may make sense for you to include a provision in the agreement that states the purchase is contingent on obtaining financing for a specific amount or at a particular interest rate. It may even be as specific as setting out a high-end for the monthly payment. If you need a particular type of loan, such as an FHA or VA loan, those conditions should also be set out in the offer.
- Closing Costs and Other Expenses
If you want the seller to pay all or a portion of the closing costs, you should specifically set that out in your offer. Generally, closing costs are capped at a certain dollar amount or a percentage of the home’s purchase price.
Even if you are not asking the seller to pay closing costs, the purchase agreement should set out who is responsible for fees related to the home purchase including recording fees, transfer tax, escrow fees, title search costs, and title insurance.
- Home Inspection
Many home purchases include a home inspection contingency in the offer. This type of contingency allows you to avoid the transaction entirely if the home inspection indicates that there are significant or expensive necessary repairs. Often, these items will compromise the structure’s integrity, but that is not always the case. In some situations, you can renegotiate the price of the home based on flaws discovered during the home inspection.
- Closing Date and Sale of Existing Home
For those who are not purchasing their first home, the sale of their existing home is an important part of the new home buying process. Many homeowners cannot afford to make two mortgage payments for more than a few months, if at all. As a result, having a contingency that specifies that the purchase will only move forward if your existing home can be sold is a good idea. You should also explicitly set out the potential closing date for the transaction. Most closings occur within 30 to 60 days, but selling your existing home or getting out of lease agreements can affect this date.
Many purchase agreements are standardized and used over and over again. However, the standard form may not work for your particular home buying situation. As a result, it is a good idea to have an attorney who is experienced in real estate look over your purchase agreement or draft a new one that will fit your needs. Our firm can help with this process. Contact us today for more information.