A quick review to save you time and money when you make an offer.
If you’re like me, reading a 9 page document written by attorneys isn’t exactly pleasure reading… So, understanding the framework of the document may save significant time and frustration when the time to sign rolls around.
This post is intended to be a short guide to help you understand a purchase contract, so that you can checklist each individual item and make sure they’ve been addressed.
- Price – How much is the property being sold for.
- Closing Date – When will the new buyer actually exchange funds for ownership of the home?
- Closing Costs
- What will the seller pay for?
- What will the buyer pay for?
- Earnest Money Deposit
- When is it due?
- How much is it?
- Where will it be held?
- How will you settle a dispute?
- What happens if the home inspection reveals some major flaw?
- What happens if the buyer is unable to get financing?
- What happens if the appraisal comes in low?
- Does the buyer have another home to sell before they can close on the deal?
These are just a few contingencies that are fairly common in a real estate transaction. Depending on the particular deal there could be any number of “contingencies” that are appropriate.
- Time frames
- How long does the buyer have to make loan application?
- How long does the buyer have to do their inspections?
- If the buyer requests repairs – how long does the seller have to respond and/or complete the repairs?
- When will the buyer take possession of the property? The day of closing? 3 days after closing?
- Prorations – Real estate taxes, association fees, condo fees, CDD fees, rents, etc. Anything that is paid monthly/quarterly/annually will be “prorated” on the day of the closing. Side note, if the tax bill comes out in November and is significantly different then what the proration was based on at the time of the closing – it would be the responsibility of the buyer and seller to come together and make an adjustment.
I.E. Since real estate taxes are paid annually and in arrears, the seller in most cases (unless the closing occurs in November or December) will be giving the buyer a credit for the portion of the year that they have owned the property but have not yet paid the taxes. If your taxes are $1,000 per year and you sell the property on July 1st – you would give the new buyer a credit for $500 to apply towards the bill when it comes due in November.
NEFAR Contract Specifics:
- The NEFAR purchase agreement allows the buyer’s lender to keep all parties (listing agent, buyer’s agent, etc.) informed of the status of the buyer’s loan. Paragraph 2 under “Application.”
- What if a storm or fire damages the home during the escrow period? Paragraph 6 addresses this issue.
- The NEFAR purchase agreement, in paragraphs 8 & 9, does a nice job of itemizing the various closing costs and allowing for check marks to determine who’s paying what.
- Paragraph 14 in the NEFAR contract details the time frames and protocol for inspections. It’s a very detailed, thorough write-up and worth the read since inspections (and property condition) are one of the most debated issues between buyer and seller.