Protecting your purchase by knowing the key clauses in home purchase agreements

Protecting your purchase by knowing the key clauses in home purchase agreements

A home purchase agreement, sometimes referred to as a “contract for sale,” is an offer made by a buyer to a seller to purchase a home, for a specific price that the seller agrees to. Both the buyer and seller may negotiate on the price and terms of the agreement, and once a final price is agreed upon then the purchase agreement is signed and the earnest money (or deposit) is applied. There is a standard six-to-eight week (but sometimes as long as ten-to-twelve week) processing time from the moment the home purchase agreement is signed to the actual finalization of the sale. So, in addition to the terms and agreement of the sale, there are also stipulations of who is responsible for what during the processing time.

A home purchasing agreement is a legal document and normally includes the following 10 key clauses:

1

The Purchase Price

This is the agreed upon price and specifically states that the price cannot be changed.

2 Title Statement

This refers to the legal ownership of the home, which should be free from any liens and clear from any encumbrances. A title search will be done to ensure this is the case, and the cost of this search is a point of negotiation. There is also a guarantee that the seller will provide a clear title and may pay the cost to issue the title insurance.

3 Property Description

A legal description of the property, the buildings occupying the property and all items included in the sale, and any/all mineral or water rights sold will be listed. 

4 Certifications of Inspections

This lists all of the inspections done, what the outcome was, and any/all repairs done to comply with the findings. These inspections can include:

• Total home inspection (including plumbing and electrical systems)
• Termites/pests
• Well/sewer
• Heating/airconditioning units
• Lead paint/radon gas/carbon monoxide, if applicable

5 Mortgage Information

Mortgage information includes a statement declaring what the down payment is, how the balance is to be financed, by whom, and the time limit in which to do this. This may also include the name of the settlement agent/escrow agent. Generally, this person is the mortgage officer at the mortgage/lender’s office and they not only process the finalization of the sale, but also hold the escrow/down payment monies for safekeeping and make sure all terms and agreements are upheld. There should also be a contingency allowing the buyer to be released from their offer if they are unable to obtain financing in a specified time.

6

The Division of the Closing/Settlement Costs

This includes specification of which party pays different closing costs, the total of those costs and when they are to be paid. This can include taxes, insurance, inspection costs, and bank/lender fees and points.

7 Closing Date/Move-in Date

The closing date is a specific date by which the seller must transfer the property to the new owner. The move-in date is when the buyer is able to take possession of the property. The first is normally considered the date all parties get together and settle all the paperwork to finalize the sale. The second is the date the buyer can take possession. As a general rule, the closing and move-in date are the same; however, when it is not the same, there should be a statement to specify who is responsible for the property from the date when the contract is signed and the date when the buyer takes possession. There should also be a provision that requires the seller to pay a specific amount of money for every day beyond the date of possession that the property is not available for occupancy.

8

Meantime Expenses

This is a provision stating that the seller is responsible for paying the utility bills, property taxes, insurance, and other house-related expenses through the closing date and is liable for any damages caused to or on the property until then.

9 Return of Funds

This is a statement requiring the return of the earnest/escrow or down payment monies if the sale is not completed due to lack of financing or some other contingency of the sale.

10 Contingency Clause

This may allow the buyer a few days to review the agreement with their lawyer or real estate professional. There are other types of contingency clauses that could be tailored to the buyer or seller’s wishes; see the following Web site for some examples: http://www.escrowhelp.com/articles/20040825-a.html

For Additional Information, Visit these Web sites:

Real Estate Lawyers at: http://www.lawyers.comVA Mortgage Centers at: http://www.vamortgagecenter.com/purchaseagreements.htmlUS Legal Forms at: http://www.uslegalforms.com/?puslf=msnagreement