Real Estate Contracts: Everything You Need to Know
Before you even think about buying or selling a home, you need to understand the real estate contracts that come with it. There are different types of contracts and each will have its own use and stipulations. Selling your home is one thing, but knowing the details in these contracts will help you make sure you don’t wind up on the losing end of a deal. Real estate contracts are necessary any time you buy or sell a piece of property, making it legally binding. There are different types of real estate contracts, each with its own importance and speculations. Don’t let the legality scare you: here are the important things you need to know about Real Estate contracts.
Forms and Contracts
A real estate contract is a legally binding agreement that outlines the terms and conditions of a real estate transaction. A primary concern of both buyers and sellers is minimizing risk. The four types of contracts in real estate include:
- Purchase agreement contract
- Lease agreement
- Contract for deed
- Power of attorney
Real estate contracts must be in writing to be enforceable. Both the buyer and seller must sign them. While available DIY templates are useful, document preparation professionals are also available.
Real Estate Contract Conditions
In order to buy a house, most people will require a mortgage. The buyer should make sure that their offer is contingent upon getting approved for a mortgage. Buyers also need to research interest rates and pre-approval if possible. The contract can specify if the buyer needs specific types of loans to seal the deal, such as an FHA or VA loan.
Always ask if the buyer would be open to a cash offer if you have the means to do so. Putting in a cash offer, and making the seller aware in the beginning can be very attractive to a seller – making it more likely for you to win if a bidding war begins.
A cash buyer can avoid all the time-consuming and costly steps that are involved in obtaining a mortgage—steps like qualifying for a loan, applying for one with the bank, arranging for a loan contingency and waiting for it to expire, starting the closing process and dealing with any delays caused by lenders and appraisers.
Buyer and seller should discuss in detail which party will be responsible for closing costs. Whether it be a dollar amount or percentage, this. can be stated in the contract. The contract should outline if the buyer or seller is responsible for common fees associated with the purchase, such as the following:
- Escrow fees
- Title insurance / Search fees
- Notary fees
- Transfer tax
- Recording fees
Home inspection clauses allow buyers to back out of a deal if they find major flaws in the property that can’t be fixed. These inspections are considered a contingency because you and your real estate agent will schedule them prior to finalizing your contract. Many buyers also have other inspections, including for lead paint and mold, after their home arrives at their doorstep. These inspections are completed before the contracts are finalized to ensure the safety of the buyer.
New Fixtures and Appliances
If the seller is including appliances and fixtures, such as dishwashers, refrigerators, and washers and dryers, in their offer to buy a property, the contract should specify which fixtures and appliances come with the property purchase. Some units, such as washers and dryers, are capable of being removed before sale. If you’re looking to have these included, it is important to have that in writing (therefore legally binding) in your contract with the seller.
Closing dates can vary from time of purchase. The time to close will vary based on the type of purchase, the amount of title, and other issues that can affect closings. The average closing time for conventional purchases is 30 days, while FHA purchases may take up to 60 days.
It’s often hard to deal with all contingencies and obtain all the required paperwork and funds in such a short amount of time, which is why we recommend clients have a longer time period. This allows you enough time to complete your due diligence while avoiding last-minute panic.
Sale of Existing Home
A homeowner who needs to sell their house in order to buy a new home should consider including a contingency in the offer, stating that they’ll make the purchase once their current residence sells. They can also add a reasonable time frame for selling the home and making sure their offer is not contingent upon selling their property, as this could affect their ability to move onto their new property when expected.
When you hire a real estate agent to sell your house, the two of you will usually sign a contract with the details for the sale already included. Agents typically use standardized, fill-in-the-blank forms. While there are many other factors included in a real estate contract (you can find out about those here), most people don’t have to worry about all the minor details when they deal with an agent.
Real Estate Contracts with Grand Strand Law Group LLC
At Grand Strand Law Group, we are here to help you with working up any real estate contracts that you may desire. We understand that buying and selling a home can be an exciting venture, and Grand Strand Law Group is here to make the process as smooth as possible. We are here to help you every step of the legal way. Give us a call at 843.492.5422 and learn about how estate planning can resolve these situations before they can begin.