The real estate contract to purchase or sell a house (if not prepared by your attorney) should be reviewed by your attorney before you sign rather than after. You can not change the contract without the other party’s consent once it is signed.
Some of the more important elements of the contract include:
- Seller(s)’s name
- Buyer(s)’s name
- Legal description of property
- Title/closing company to use
- Purchase price
- Down payment
- Seller financing
- Other payment terms
What is included besides real estate ?
List any property not clearly part of the sale or permanently attached to the real estate that are to be included or excluded (e.g., shades, curtains and drapes, curtain and drapery hardware, TV antenna, satellite equipment, kitchen range, fireplace doors and screens, bathroom mirrors, shelving, etc.)
Whether brokers are involved and are due to be paid commissions (and who pays, usually seller)
- date (usually “on or before”, and perhaps including an automatic “grace” period to correct title problems etc.)
- pre-closing “walk-through” (this does NOT replace inspections, see preparing for closing, but is only to see that the property is in the condition it was when the contract was signed, and that the items to be left are still there)
Possession is often on Closing or 3 days after closing, but can be 30 days or otherwise, and in any case needs to be specified.
[after the property itself and the purchase price, this is likely most important part of the contract]
- Financing – 3rd party or seller financing – what are the minimum acceptable terms buyer must accept:
- amount financed; loan term;
- interest rate;
- maximum payment amount
- “to buyer’s satisfaction” is open ended and may give buyer a “free out” if they decide not to purchase the house
- Closing on sale of prior residence
- Other ?
Who pays various expenses ?
- there is no “standard”, but listed party often pays:
- Title commitment (seller)
- Title policy (buyer)
- Closing fees (split)
- Survey (buyer – often required by lender)
Proation of real estate taxes 11/29/07
Typically, the purchase price paid to Seller is reduced by the pro rata portion of the real estate taxes for the part of the year Seller owned the property. The same amount is credited to the Buyer. Seller thus bears the burden of the taxes for the portion of the year the property was owned by Seller.
Buyer reveives the “full” real estate tax bill at the end of the year and pays the entire tax using in part Buyer’s own funds for the portion of the year Buyer owned the property, plus the funds from the “credit” Buyer received at closing for the part of the tax for the part of the year Seller owned the property.
If Seller financing is involved, and Buyer defaults so that Seller gets the property back, Seller may have to pay the real estate tax even though it already “paid” the portion of the tax for the part of the year that Seller owned the property through the “credit” to Buyer against the purchase price at closing.
Inspections (see preparing for closing) that you are entitled to obtain need to be spelled out, as well as happens if the inspection is not satisfactory, e.g., seller to pay up to $350 for necessary mechanical repairs and otherwise by mutual agreement or the contract terminates (again, there is no “standard” and buyer often pays, but it is negotiable).
Any other special provisions that may be needed in each case.
Budget for home ownership
Consider the expenses you will incur in home ownership before committing to the purchase and depleting your savings. Even with the inspections significant unknown repairs can be necessary, and even expected repairs can exceed the estimated amount, just generally or because other issues were discovered on “opening” up the project. Ongoing expenses include insurance, real estate taxes, homeowner fees, utilities, landscaping and lawn care, and routine and periodic maintenance. After completing the purchase you will need savings to cover the unexpected expenses for the home and that otherwise occur in life.