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The Purchase Contract
Seven Terms To Watch For
In A Purchase Contract
Pay special attention to these 7 items.
- Date.Make sure the date the buyer wants to take title is reasonable to you. 30 days after acceptance of contract is customary and reasonable. Any date beyond this should be looked at with care.
Date Of Possession. Make sure the date the buyer wants to move in is reasonable to you. If you do not want to give possession at time of closing, there should be a an attached document to the purchase contract (an addendum) outlining when possession will be given, if rent money will be owed, who is responsible for payment of utilities, etcetera. Remember, after closing, you no longer own the home. Your only protection is what was written into the purchase contract. Verbal promises mean nothing.
- Look for the largest earnest-money deposit possible. Since the deposit is forfeited to you if the buyer backs out without contract contingency - a large deposit is usually a good indication of a sincere buyer. Don't hesitate to ask for more. One point (or 1%) of the purchase price is not unreasonable.
Typically, the earnest money is held in the earnest money trust account of the Buyer's broker until closing; however, the contract can stipulate where the earnest money is to be held. It can even be given directly to you, if the Buyer so agrees.
- Check the list of items that the buyer expects to remain with the property and be sure it's acceptable. Since personal property (or chattel) can often be a bone for contention in contract negotiations, remove or replace any item or fixture that you are not willing to include in a sale before you even market the home. See: Real Estate Guide: Buying Your Home - Fixtures.
Repairs.Determine what the requested repairs will cost and whether you're willing to do the work, or would rather lower the price by that amount, or even escrow (put funds reserved from proceeds into a trust account) for the buyer to use after closing. Since the contract is usually contingent on a buyer's satisfactory home inspection, it would be wise for you to have a home inspection of your own before you market the home. That way there will be no surprises and you have the opportunity to make necessary repairs first and eliminate a reason for the buyer to make unreasonable repair demands or even withdraw from the contract altogether. See: Real Estate Guide: Owning Your home - Improvements.
- See what other factors the buyer wants met before the contract is final? Mortgage approval is the most common, but these may also include inspections, selling a home, review of the contract by an attorney, etc.. Set time limits on contingencies so that they won't drag on and keep your sale from becoming final. Should you be presented with a contract that contains a contingency saying the buyers must first sale their home (a 'sales contingency') be sure to add a 'first right of refusal clause', sometimes called a 'kick-out' clause as well an expiration date to the contingency. See: Real Estate Guide: Buying Your Home; Making an Offer - Contingencies
The Contract Expiration Date.See how long you have to make a decision on the offer. Make a decision to counter or accept as quickly as possible. If you attempt to accept the offer after the expiration date there is no guarantee of a contract. Or, should the buyer withdraw the offer before you formally accept it, again, there is no contract.
Contracts for the sale of an interest in real property as well as certain leases must be in writing.
The "Statute of Frauds" in Ohio and most state requires that certain legal instruments of law such as deeds, real estate sales contracts, and leases of more than a year, to be in writing to be legally enforceable. Your only protection is what is written into these instruments. Verbal promises mean nothing.
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