The Dallas Morning News
What buyers should look for in a real estate contract
Nobody enjoys perusing dozens of pages of legalese. Every prospective buyer who’s serious about purchasing a home and who’s agreed on price with the seller eventually has to face the paperwork and sift through sheet after sheet of a real estate contract that can be complicated, confusing and tedious. Yet it’s extremely important to review and understand. After all, when you’re about to engage in the biggest and most expensive transaction of your life, the fine print – as frustrating and fussy as it is – matters.
Which is why knowing what to expect and look for in a purchase contract and learning how to decipher key terms, clauses and contingencies is crucial, per the pros.
“Buyers need to realize that, by accepting and signing a real estate contract, they are bound to it. So buyers need to fully understand what they are getting themselves into before signing,” said Brian Pendergraft, attorney with The Pendergraft Firm, LLC, Greenbelt, Md.
First-time purchasers who’ve never been through this process before aren’t the only ones who need to be pay close attention to the wording in a contract. Every would-be buyer needs to scrutinize before signing.
“These days, it’s easier than ever to sign documents online, on-the go, and even on your phone while sitting in traffic,” said Samuel Pawlitzki, Realtor with Beach Cities Real Estate in Malibu. “But a real estate contract should not be taken lightly.”
There are many essential ingredients that should be included in your real estate purchase contract, such as:
Names of both parties involved and the address of the property;
The purchase price agreed to and the amount of the earnest money deposit (due when the contract is signed and held in escrow by a third party);
Contingencies, including financing (your offer is contingent upon you obtaining financing at a particular interest rate); seller assistance (if you desire the seller to fund some or all of your closing costs); appraisal (often required by your lender); professional inspection (permitting you to nix the deal if the inspection reveals cost-prohibitive defects); and sale of your existing home;
Condition of the property and what’s included with/excluded from the property (appliances and fixtures you want the seller to leave intact);
Requested closing date (typically within 30 to 60 days); and
Estimated tax prorations (property taxes the buyer is responsible for paying and/or will be reimbursed for).
“The most important terms involve the varying contingencies and clauses with deadlines attached to them for items like financing, appraisal and home inspection,” said Cedric Stewart, Realtor with Keller Williams Capital Properties in the greater Washington, D.C., area. “These can be especially dangerous if the buyer doesn’t stay on top of the deadlines. For example, in an inspection contingency, you’ll have a certain number of days to perform an inspection and submit a request for repairs, but if you miss the cutoff date, you’re stuck doing the work yourself.”
Stewart adds almost anything in a contract can be negotiated and revised by either party before it’s signed – including price adjustments, seller concessions and credits, which are often negotiated during the inspection and appraisal periods of most contracts.
Ernie Rafailides, attorney and broker with Towson, Md.-based Bayview Management, LLC, said buyers need to read the contract as if they intend to break it.
“The contract is not about the honeymoon – it’s about the divorce. Buyers should be reading the language that describes exactly what they’re buying, including any fixtures or attachments. They must understand what happens if they can’t honor the contract. Can the seller sue them down the road? What happens if the seller breaches? Buyers need to make sure, in the worst-case scenario, they are only losing their deposit.”
For these and countless other reasons, experts strongly recommend enlisting a real estate attorney to review your contract carefully with you, even though this is not required.
“Legally, a buyer’s agent, unless they are a lawyer, can review the contract but is not an attorney and should not be dispensing legal advice about the contract.
“But the agent can review and make sure the terms that were negotiated are correctly represented,” Rafailides said.
Erik J. Martin, CTW Features