Offers & Contracts
One of the most common misconceptions among home buyers occurs when it comes time to making an "offer" or a "bid" on a home. Many believe that even though they have tendered an offer to the sellers, that their options are still open. To some degree, this is correct. If the seller rejects the offer, counteroffers it, or simply does not respond, options are still open. You, as the buyer, can accept the counteroffer, make another offer, or simply move on.
If, however, the seller accepts the offer (and you are notified of its acceptance) then a legally binding contract has most likely been struck. In the majority of cases and localities, there is not even the need for additional paperwork--the signed offer becomes the contract. Your options now are more of the "do we want to paint the master bedroom before or after we move in?" Once the offer has been accepted, the "lets think it over just a little bit more" phase has passed. This is why it is crucially important to make sure that all of your bases are touched and all of your intentions made clear in the offer--it can become a binding contract in the blink of an eye and a stroke of the seller's pen.
Contracts
Once the perfect home has been found, it is time for the house buyer to take the step that makes so many of us tremble with fear: the sales contract. To take some of the mystery out of the house sales contract, we will discuss what the contract involves and the components of most housing sales contracts.
First, remember that what you are signing is a legal contract. No matter what anyone says, you are not just making an "offer". Most sales contracts will have some paraphrase of the following: "This is a legally binding contract. If not understood, seek competent advice before signing." To put it simply, if what is written on the contract regarding selling price and provisions is accepted by the seller, you have bought a home. Unlike other negotiable businesses, such as the automobile business, "would you take?" is defined in Real Estate by a legally binding contract backed with a monetary deposit.
If, however, the seller accepts the offer (and you are notified of its acceptance) then a legally binding contract has most likely been struck. In the majority of cases and localities, there is not even the need for additional paperwork--the signed offer becomes the contract. Your options now are more of the "do we want to paint the master bedroom before or after we move in?" Once the offer has been accepted, the "lets think it over just a little bit more" phase has passed. This is why it is crucially important to make sure that all of your bases are touched and all of your intentions made clear in the offer--it can become a binding contract in the blink of an eye and a stroke of the seller's pen.
Some of the items that need to be addressed in an offer are:
- The proposed selling price (your offer).
- Any concessions you desire the seller to make.
- Any financing contingencies (for example, subject to you being able to obtain a satisfactory mortgage. You can go as far as to state maximum interest rates, specific terms, etc.)
- Any home inspection contingencies (for example, subject to an acceptable whole house inspection report).
- A clear definition of precisely what is to be included in the sale. Don't simply assume that items such as porch swings, fireplace doors and refrigerators are included. Doing so usually causes some unpleasant surprises on moving day. If there is any question, be specific!
- The amount of earnest money (your deposit) that is being tendered with the offer.
Contracts
Once the perfect home has been found, it is time for the house buyer to take the step that makes so many of us tremble with fear: the sales contract. To take some of the mystery out of the house sales contract, we will discuss what the contract involves and the components of most housing sales contracts.
First, remember that what you are signing is a legal contract. No matter what anyone says, you are not just making an "offer". Most sales contracts will have some paraphrase of the following: "This is a legally binding contract. If not understood, seek competent advice before signing." To put it simply, if what is written on the contract regarding selling price and provisions is accepted by the seller, you have bought a home. Unlike other negotiable businesses, such as the automobile business, "would you take?" is defined in Real Estate by a legally binding contract backed with a monetary deposit.
What are the Components of a Contract?
Although there will be some variance based on the location of your residence, most Real Estate contracts contain most or all of the following items:
- What: A legal description of the property as well as the street address.
- How Much: The selling price.
- Mortgage Contingency: Subject to obtaining a mortgage (if applicable) and the specifics of the mortgage--amount, rate and term. Application to be made in X number of days.
- Deposit: How much money accompanies the contract and who will hold it.
- Closing: When and where
- Inclusions & Exclusions: What is and is not included in the sale of the property.
- Home Inspection: Contingency for and to be done in X number of days.
- Warrenties: Any that are included with the house and description of the warranty.
- Condominium: If the property is a condo, other provisions will apply.
- Well & Septic: If applicable, they must be tested (and pass).
- Termite & Pest Inspection: Who will pay and if there is infestation or damage, who will repair.
- Possession Date: When the buyers take possession of the house--before, at or after closing.
- Acceptance: How long the sellers have to respond to the offer with either acceptance or a counter-offer.
- Arbitration: Any provisions for arbitration of disputes.
- Insurance: Whose insurance covers the property up until the closing date.
- Property Disclosures: Notices of any property disclosures concerning the house
