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| Your Toolkit to Prepare for Homeownership |
Real estate agents usually have a variety of standard forms (including Residential Purchase Agreements) that are kept up-to-date with the changing laws. When you use a real estate agent, these forms will be available to you. In addition, real estate agents cover the questions that need to be answered during the process. In many states, certain disclosure laws must be complied with by the seller, and the real estate agents will ensure that this takes place.
If you are not working with a real estate agent, keep in mind that you must draw up a purchase offer or contract that conforms to state and local laws and that incorporates all of the key items. State laws vary, and certain provisions may be required in your area.
After the offer is drawn up and signed, it usually will be presented to the seller by your real estate agent, by the seller’s agent if that’s a different agent, or often by the two together. In a few areas, sales contracts are typically drawn up by the parties’ lawyers.
WHAT THE OFFER CONTAINS
The purchase offer you submit, if accepted as it stands, will become a binding sales contract (known in some areas as a purchase agreement, earnest-money agreement or deposit receipt). It’s important, therefore, that it contains all the items that will serve as a “blueprint for the final sale.” According to the NAR, these purchase offer items include the following:
EARNEST MONEY
This is a deposit that you give when making an offer on a house. A seller is understandably suspicious of a written offer that is not accompanied by a cash deposit to show “good faith.” A real estate agent or an attorney usually holds the deposit, the amount of which varies from community to community. This will become part of your down payment.
CONTINGENCIES
If your offer says “this offer is contingent upon (or subject to) a certain event,” you’re saying that you only will go through with the purchase if that event occurs. The following are two common contingencies contained in a purchase agreement:
SELLER’S RESPONSE TO YOUR OFFER
You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that’s that, and the sellers cannot later change their minds and hold you to it.
If the seller likes everything except the sale price, the proposed closing date or the basement pool table you want left with the property, you may receive a written counteroffer, with the changes the seller prefers. You are then free to accept or reject it or to even make your own counteroffer. For example, “We accept the counteroffer with the higher price, except that we still insist on having the pool table.”
If you are not working with a real estate agent, keep in mind that you must draw up a purchase offer or contract that conforms to state and local laws and that incorporates all of the key items. State laws vary, and certain provisions may be required in your area.
After the offer is drawn up and signed, it usually will be presented to the seller by your real estate agent, by the seller’s agent if that’s a different agent, or often by the two together. In a few areas, sales contracts are typically drawn up by the parties’ lawyers.
WHAT THE OFFER CONTAINS
The purchase offer you submit, if accepted as it stands, will become a binding sales contract (known in some areas as a purchase agreement, earnest-money agreement or deposit receipt). It’s important, therefore, that it contains all the items that will serve as a “blueprint for the final sale.” According to the NAR, these purchase offer items include the following:
- Address and sometimes a legal description of the property
- Sale price
- Terms—for example, all-cash or subject to your obtaining a mortgage for a given amount
- Seller’s promise to provide clear title (ownership)
- Target date for closing (the actual sale)
- Amount of earnest-money deposit accompanying the offer, whether it’s a check, cash or promissory note and how it’s to be returned to you if the offer is rejected or kept as damages if you later back out for no good reason
- Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller
- Provisions about who will pay for title insurance, survey, termite inspections and the like
- Type of deed to be given
- Other requirements specific to your state, which might include a chance for attorney review of the contract, disclosure of specific environmental hazards or other state-specific clauses
- A provision that the buyer may make a last-minute walkthrough inspection of the property just before the closing
- A time limit (preferably short) after which the offer will expire
- Contingencies (an extremely important matter and discussed in detail in the following pages)
EARNEST MONEY
This is a deposit that you give when making an offer on a house. A seller is understandably suspicious of a written offer that is not accompanied by a cash deposit to show “good faith.” A real estate agent or an attorney usually holds the deposit, the amount of which varies from community to community. This will become part of your down payment.
CONTINGENCIES
If your offer says “this offer is contingent upon (or subject to) a certain event,” you’re saying that you only will go through with the purchase if that event occurs. The following are two common contingencies contained in a purchase agreement:
- The buyer obtaining specific financing from a lending institution (If the loan can’t be found, the buyer won’t be bound by the contract.)
- A satisfactory report by a home inspector “within 10 days (for example) after acceptance of the offer” (The seller must wait 10 days to see if the inspector submits a report that satisfies you. If not, the contract would become void. Again, make sure that all the details are nailed down in the written contract.)
SELLER’S RESPONSE TO YOUR OFFER
You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that’s that, and the sellers cannot later change their minds and hold you to it.
If the seller likes everything except the sale price, the proposed closing date or the basement pool table you want left with the property, you may receive a written counteroffer, with the changes the seller prefers. You are then free to accept or reject it or to even make your own counteroffer. For example, “We accept the counteroffer with the higher price, except that we still insist on having the pool table.”
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