Key Points in the Purchase Contract
Home buyers who haven’t bought or sold a home recently are often surprised by the complexity of today’s purchase offers. Gone are the days of the one page purchase contract. The standard California purchase contract is 8 pages long. Verbal offers to buy real estate aren’t binding so your offer should be in written form.
The written offer is usually drafted by your real estate agent or attorney. Most buyers think simply in terms of the price when they decide to make an offer. But the price is just one of many details that make up the purchase contract including:
- The deposit amount
- The mortgage and down payment amounts
- The closing date
- The occupancy date
- An itemization of what is included in the sale
- Time periods for performing the contingencies
- An itemization of who pays for fees associated with the sale
- Who is responsible for complying with any point of sale ordinances (such as installing smoke detectors)
- Optional clauses such as an arbitration clause for dispute resolution or a liquidated damages clause to limit damages that can be awarded to the seller if the buyer breaches the contract
The seller needs to know all the terms and conditions of the buyer’s offer before he can decide if the offer is acceptable. This is why all the terms and conditions that will affect the purchase transaction are encompassed in the offer. Price, while important, is not the only consideration. For example, a full price offer might not be acceptable to the seller if it’s contingent on the buyer selling his home. If the offer is accepted by the seller or if it’s countered by the seller and then accepted by the buyer, it is legally binding on both parties.
To prepare to make an offer, ask your real estate agent to give you a sample copy of the purchase contract. Read it over, and if there’s anything you don’t understand, ask for an explanation. Too often, buyers don’t read the contract in advance. They’re rushed when they do finally make an offer, and they don’t take the time to read the contract while they’re in the midst of making an offer. Ideally, no matter how rushed you are, you should sit down with your agent and review the contract. Together you can decide on the specific terms you want to include in the contract. Be sure to leave yourself enough time so that you fully understand the contract before you sign it.