By Dian Hymer
Making an offer on a home you want to buy is an exciting experience. But no matter how elated you are, be sure to focus your attention on protecting yourself properly in the transaction. To do this, your offer (also called a purchase agreement) should include all the provisions, terms and conditions that you'll require to buy the property.
One couple was so interested in tying up a hot new listing that they made an the over-asking-price offer, without specifying many of the terms of the contract, such as the closing date and the time period for their financing to be approved. The buyers knew that the sellers wanted to exclude their master bedroom drapes from the sale, but the buyers didn't address this issue in the contract. They hoped that the sellers would change their minds and let the drapes stay with the house.
Some buyers are annoyed at having to deal with complicated contractual issues, without first knowing whether the sellers will accept their price. They figure that if the price is right, the rest will follow. The problem with this approach is that you may not be dealing with a cooperative party on the other side. By accepting your price, the seller may feel that he's entitled to call the shots when it comes to ironing out the remaining terms and conditions of the contract. Rather than build uncertainty into the contract, it's better to agree on as many contract terms as possible at the beginning of the transaction. Then you and the other party will know exactly where you stand. This will keep the stress-level to a minimum.
First Time Tip: Your purchase contract should minimally include the following: an identification of the property and the buyers and sellers; the purchase price and the amount of the good faith deposit (also call the earnest money deposit); the financing terms, including the maximum interest rate and points the buyers will accept, and the time period for the buyers to obtain their financing commitment; prorations such as for property taxes and rents (if applicable); the closing and possession dates; a provision for the transfer of clear title from the sellers to the buyers; attached and personal property that are included and excluded; disclosures and compliance obligations that are required by law; inspection contingencies (home, termite, roof, drainage, etc.); a final walk-through provision; additional terms and conditions (such as the sale of another property, seller warranties, rights of tenants in possession, a home warranty plan, risk of loss, condition of the property; methods for dispute resolution; confirmation of the agency relationship where required by law; how closing costs will be shared; and a time period for the sellers' response to your offer.
If your purchase is contingent on an event happening that is not covered in the above list, you should include it in your purchase agreement to protect yourself. You may be refinancing another property to accumulate the down payment needed to close on the new house. Unless the refinance is complete and you have the cash in hand, you should make the successful completion of the refinance a contingency of your contract. If your refinance doesn't come through, you would probably have a legitimate way out of the contract.
The Closing: To keep both buyers and sellers working on the same wavelength, compile a list of all the contract contingencies and their due dates. Make sure that all parties to the contract have copies of the timeline. And confirm that there aren't any disputes about critical dates.
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