Attention To Details - Foundation Realty Team
A written and signed (ratified) purchase offer can bind both you and the seller. Whether it's called a contract-to-purchase, an offer, binder, or earnest-money agreement, you can be held to your offer once the seller signs it. If you leave anything out and the seller accepts and signs the contract, you're out of luck. That's why your purchase offer must cover every minute detail and aspect of the sale. Earlier, we discussed what goes into an offer. This section reiterates that and offers everything that should be considered when entering into a binding agreement. The following should be carefully considered:
- The date and amount of ‘good faith’ deposit or earnest money;
- Your name as buyer and the property owner's name as seller;
- The total purchase price;
- Full legal description and street address of the property; and
- The lawyers, brokers and others involved in the sale, as well as the terms and conditions of their compensation.
The options available to both buyer and seller should either party default include important protective and escape clauses which should be clearly stated in the offer contract. The entire agreement should be subject to, or contingent on, their fulfillment. Here are some key 'subject to' clauses and useful contingencies to think about:
Earnest money: Ensure that your earnest money will be deposited in a trust account or with a neutral third party escrow service (such as a title company) or attorney acting as an escrow agent. If you're putting up a large payment, stipulate that it can be held in an interest-bearing account and that interest earned will be credited to your side of the ledger at settlement.
Returning earnest money: Set out any conditions for return of your money, including how quickly you'll get it back if the offer expires or you withdraw your offer, or if for some reason the seller decides not to sell.
Deed and title condition: Your offer should state the type of deed and condition of title you'll accept from the seller. Your contract should also make clear what actions the seller must take to deliver a good title by settlement, and what recourse you have should that not occur.
Financing: Make your offer contingent on getting a written loan commitment within a specified time and at terms agreeable to you.
Seller financing: The terms and conditions of any seller financing should be fully and exactly detailed in the contract.
Settlement date and possession: The sale should be made subject to a settlement date and when you will be entitled to take physical possession of your new home. Settlement usually correlates with the length of time required for a title search and mortgage approval—typically 45 to 60 days. Possession usually occurs immediately after settlement.
Settlement agent: The contract usually specifies the attorney or title company that will perform final settlement services.
Prorating: The contract should state that property taxes (among other things) will be prorated to the closing date.
Sale of current residence: If your purchase of the property is contingent on the sale of another, this should be carefully stated.
Response time limit: Your contract should require the seller to accept the offer in writing within a certain time—usually no more than 48 hours—or the offer will be void.
Home inspection: This contingency clause gives you the right to have the property inspected and to withdraw your offer if the inspection report isn't satisfactory to you for any reason. It may also allow for price adjustments to pay for any necessary repairs.
Environmental tests: You may want to include a clause requiring that the property be tested for radon, lead paint, asbestos, or urea formaldehyde insulation.
Termite inspection: Many contracts require the seller to order and pay for a termite inspection. If yours doesn't, insert language to that effect.
What goes with the house: Specify what furnishings—such as curtains, rugs, chandelier, and so on—are included in the sale.
Condition of house at settlement: Specify what must be in demonstrable working order at the time of settlement, as verified during a walk-through of the premises a day or so before settlement.
Other conditions: The list continues, but every additional condition runs the risk of making your offer more complicated and less appealing.