If you are in the market to buy a home, you will need to enter into a real estate Contract. This is a legally binding document that specifies the terms and conditions of the sale. The key to writing a good contract is clarity and understanding of all terms. The contract should be written in plain language, avoiding legalese. It should also clearly state the parties’ expectations and their responsibilities, including when closing will take place. Some important terms to include are closing costs, escrow amount and who is responsible for the home warranty.
The process of building a real estate Contract begins when the buyer submits an official offer letter to the seller. The seller can then accept, reject or counter the offer, altering items like purchase price, closing costs and contingencies. This is known as the negotiation portion of a real estate contract and will often happen between the buyers’ and sellers’ agents.
A good real estate Contract will have contingencies, which are provisions that allow the contract to be terminated if certain conditions are not met. Some common contingencies are financing, home inspections and a closing date. A financing contingency allows the buyer to back out of the transaction if their mortgage does not get approved. A home inspection contingency allows the buyer to terminate the contract if they discover problems with the property that they cannot afford to fix.
Closing costs, which are fees associated with transferring title and closing the transaction, should be clearly stated. The parties will typically agree who is responsible for these expenses. It is common for a seller to cover these expenses, but this needs to be specified in the contract.
Other important terms to include in a real estate Contract are the amount of earnest money, which is a deposit that shows the buyer’s seriousness about their offer. This will be specified in the offer letter, and is normally refundable if certain contingencies are not met. The contract should also specify whether there are any liens or other encumbrances on the property that would prevent its transfer at closing.
A real estate contract should also have a clause that indemnifies both the seller and the buyer against any claims or damages related to the property. This includes, but is not limited to, any damage or destruction caused by either party. The contract should also state that the seller will maintain insurance on the property until closing.
The last requirement of a real estate Contract is that both parties have the legal capacity to sign the agreement. This can include legal adults, as well as minors who have the consent of their parents. A real estate contract is not required to be notarized, but many recording offices require the signatures of the seller and buyer to record the deed. A notary can provide this service for a fee. Notarized contracts are typically more enforceable. However, the presence of a notary does not guarantee that the document is valid, nor that it meets all legal requirements for the recordation of a deed.
