You’d be shocked to hear that Mr Sharma, a professional investor in the real estate market, almost agreed to all the terms of the contract for his most awaited property without paying careful attention to the terms of the agreement. And it was just his signature that was left to complete the transaction. He trusted the seller with the real estate purchase contract but guess what?
One fine day, his son noticed that the document didn’t have the complete information, and there was a price difference in the contract to what Mr Sharma agreed with the seller.
So, whether you’re renting or buying, it’s always essential to go through the contract terms to make the purchase transaction process easy and risk-free. In addition, it’s a necessary step to safeguard the interest of both parties before you officially invest in a real estate market.
A real estate purchase contract is the most vital legal document that outlines the terms and conditions of purchasing and selling a property. The papers usually contain all the significant factors from the purchase price to closing cost to the earnest money.
The whole idea of the purchase agreement is to protect the interest of the seller and buyer. Purchase contracts may differ from one state to another and from one country to another. Unless you want to make it complicated, make sure to check the critical elements mentioned below to avoid getting into any financial or legal hurdles-
Key Elements Of A Real Estate Purchase Contract Agreement
A real estate purchase contract is a legal document. It contains all the necessary information that allows the buyer and seller to strike a transaction based on the mutual agreement.
Some critical elements of a purchase contract agreement include the following points-
Identification Of Both The Parties
Foremost, the purchase contract should identify the buyer and seller’s identity and the necessary information.
If there is more than one buyer, whether the buyer plans to be joint tenants or tenants in common, these details must go in the document.
Check Property Details
It must outline the exact address of the property along with the property’s legal description as per the official records of the local authority.
The Purchase Price
The price that an investor or buyer is ready to pay for the property is the purchase price.
The contract must include the agreed purchase price, the selling price for the property. In addition, it must consist of deposits or additional costs, if any, associated with the transaction.
The financing section of the agreement states how the buyer will be paying to take possession of the property. Whichever way you decide to pay, there are some standard methods of payment stated in the purchase contract-
- Making cash down payment
- Borrowing a new mortgage loan
- Paying in full with cash
- Arrangements involving existing mortgage
The Earnest Money
Earnest money means an offer made by a buyer to the seller, reflecting the sincerity and the excellent intent towards purchasing a home. It gives the buyer the needed time to arrange the funds to close the final deal with the seller.
The agreement should state whether the earnest money deposit will be credited to the final purchase amount or not.
Closing Cost And Dates
Closing costs are one-time fees that generally include property and transfer taxes, title insurance, recording fees, pre-payment of insurance premiums, etc. It is an umbrella term for the various fees or expenses related to purchasing a home.
The parties can decide to pay the entire closing cost, or the buyer and seller may split the costs. If they choose to break the price, it should be noted in the purchase agreement to avoid future conflicts.
It’s on the closing date when the buyer can happily take possession of the property. Therefore, your purchase contract should mention the date on which the transfer of ownership or title will occur and when the buyer will receive the keys to the property.
List Of Items Excluded And Included
There are certain fixtures, items or structures attached to the property that are typically excluded or included in the sale of the real estate. Therefore, it’s advisable to have everything written in the agreement to avoid heartbreaks once you move in.
However, here is a list of a few items that could be excluded or included in the sale-
- Bathroom fixtures
- Light fixtures
- Windows and doors
- Built-in basic kitchen appliances
- Household appliances
- Wall-mounted items
Option Of Termination
If either party wants to back out from the purchase agreement, they can do so within the terms of the deal. Furthermore, both the buyer and the seller cannot hold each other for future obligations post-termination.
Contingencies mean a term in the contract that defines a condition or action that both buyer and seller must follow for a purchase contract to become binding. Different contingencies can vary from party to party depending on the various factors.
Contingencies are conditions to consider before the sale of real estate. Below are some common contingencies that include-
- Appraisal Contingency
- Financial Contingency
- Title Contingency
- Inspection Contingency
It is an essential part of the purchase agreement as it contains all the legal tax-related information for both the seller and the buyer. It must include various taxes like property tax and other miscellaneous items, applicable for both parties’ smooth experience.
The Act Of Disclosure
The real estate purchase agreement may or may not include the disclosure information based on the law applicable in the region. The disclosure is the act of disclosing the necessary details and property status for safety reasons by the seller to the buyer.
The purchase agreement must have both parties’ valid and genuine signatures to make it enforceable under the applicable law. Signatures will be a sign of acceptance of the real estate purchase terms and conditions.
The Final Thoughts
The purchase agreement is a legal document containing all the required details for the possession of the property. Before you sign that purchase contract, make sure to sign it only when you’re confident and agree to the contract terms.
All this might feel overwhelming, but you’d not be left alone to handle all the legal formalities of buying the real estate property. There are real estate agents to help you sail through easily without missing out on any multiple points.
However, we always recommend that our clients educate themselves to avoid minor or significant conflicts or confusion. And even if you’re not a legal expert, it’s good to be aware of the legal aspects of buying and selling a property.
AsmitA Sand Dunes, one of the renowned names in town, has an array of real estate properties at the most affordable prices combined with unmatched conveniences. So if you are looking for a hassle-free home buying experience in Malad at a cheap dirt price, let you know in the comments below.