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The Purchase Contract
Most real estate agents use standard pre-printed purchase contract forms, filling in the details specific to your purchase terms. These legally-binding documents are used to:
- Set forth the terms of the sale
- Establish the rights and obligations of the parties involved
- Specify what actions will be taken in order to close the sale, and
- Establish time frames for those steps to be completed
While most buyers are usually fully aware of terms regarding price, closing date, and financial arrangements, there is a tendency to overlook much of the rest of the contract. However, since all the contract terms will be binding, it is important to understand what you are agreeing to before signing the contract. Not doing so can be a costly mistake, especially if there are problems or difficulties in the transaction.
When an offer becomes a contract
A purchase contract is created when there is a “meeting of the minds” on all terms—when you and the seller have come to agreement and signed the offer form along with any counter-offers and addenda. Real estate contracts must be in writing; verbal contracts to purchase real estate cannot be enforced.
Some of the items that you may be agreeing to may include:
- What personal property will be included or excluded from the sale.
- Who will pay for required repairs or retrofits.
- What the seller’s disclosure obligations will be.
- What the seller’s obligation to maintain the property will be.
- What the seller is warranting about the property.
- What the buyer’s inspection rights will be.
- What will happen in the event either party does not comply with the contract.
- Whether or not the buyer can get out of the contract upon an attorney review and/or other contingencies.
- What will the parties’ legal rights and attorney fee provisions be in the event of a breach of contract.
Do your homework in advance
It is highly recommended that you read and review the pre-printed forms with your buyer’s representative before you write and sign a purchase offer. That way, once you are ready to present a bona-fide offer, your focus will be on the primary issues of price, terms, and closing date.
Reviewing and understanding the purchase contract form ahead of time can also help you strengthen your negotiating position, protect yourself from incurring unnecessary costs or problems, and gain a better understanding of what you will need to do to conclude the sale.