The purchase contract is the central document of your Real Estate
transaction. In essence, it contains the purchase price offered,
the timelines of the escrow (how many days to close, etc), and any
contingencies of the sale on either the buyer or seller’s
behalf. While heavy negotiation will often produce a volume of counter
offers, addendums, and proposals, all C.A.R. purchase agreements
contain the same standard components:
Address and sometimes a legal description of the property
Sale price
Terms -- for example, all cash or subject to your obtaining
a mortgage for a given amount
Seller's promise to provide clear title (ownership)
Target date for closing (the actual sale)
Amount of earnest money deposit accompanying the offer, and
whether it's a check, cash or promissory note, and how it's to
be returned to you if the offer is rejected -- or kept as damages
in case of buyer default
Method by which real estate taxes, rents, fuel, water bills
and utilities are to be adjusted (prorated) between buyer and
seller
Provisions about who will pay for title insurance, survey, termite
inspections and the like
Type of deed to be given
Other County specific requirements, such as the infamous Tiger-Salamander
zones, megan’s law provisions, etc
A provision that the buyer may make a last-minute walk-through
inspection of the property just before the closing
A time limit (preferably short) after which the offer will expire
Contingencies – physical inspection and financing among
others
Contingencies
No sale is an as-is sale. Regardless of what you may have heard
or read, you are never obligated (at that moment) to purchase a
home by merely signing an offer. As a buyer, you are always protected
– in short, offers are always made “subject to”.
The “subject to” clause refers to your contingencies.
When making an offer at a given dollar amount, you will basically
state that “I agree to purchase this home at “X”
dollar amount, subject to the following conditions…”
The most common and important contingencies of a sale:
Physical:
While the brochure may state as-is sale, you always have to right
to demand a physical inspections period. During this time you will
have the right to perform any non-destructive (unless separately
agreed upon) inspection you desire in order to determine if you
wish to continue with the purchase.
The most common physical inspections are:
Structural Pest Report:
a report that determines the extent of damage from fungus, dry
rot, or any infestation of wood-boring Beatles or Termites. Pest
inspectors are state-licensed and provide a bid for repairs based
on a standardized rate.
Home Inspection:
Licensed home inspectors basically provide a complete visual
or non-destructive inspection of the property. They’ll check
all the appliances, including water heaters and furnaces, inspect
the foundation, roof, and siding. Their reports are basically
an exhaustive checklist of all the home’s features and their
conditions – they give you a much better idea of the home’s
condition than just a simple walk through, and considering the
purchase prices of homes, are a very good investment.
Roof, Chimney, & Foundation
reports:
Depending on the age of the home, these reports are often very
valuable. It’s usually a good idea to get a chimney report
if the home actually has a wood-burning fireplace – a dirty
or damaged chimney/flu can be a fire hazard. Roofs can be expensive
as well, and on older homes (especially +2-story) you definitely
want to make sure that your home has a solid footing.
Country Property:
As one could imagine, inspections on country property are even
more thorough and necessary – in general, you’ll want
to inspect the well, septic system, and perhaps even have a peculation
test to insure that you have sufficient ground water.
Loan, Appraisal, & Insurability:
In addition to the condition of the property, you need to insure
that the property is worth what you’re offering! This is
where the appraisal condition comes into play, basically, you’ll
state that you agree to purchase the home at $600K provided that
it appraises for no less than $600K. Even if you’d personally
take the home regardless of what it appraises for, your lender
will probably be of a different opinion; if your home doesn’t
appraise for a the correct dollar amount, your loan may not go
through.
In addition, the contract also provides a condition for final
loan approval. When a lender issues a pre-approval, certain conditions
will need to follow, while they vary widely, common conditions are
verification of employment history, verification of tax returns,
and proof of property insurability. In addition, a lender will also
need to approve of a preliminary title report (as you should as
well) – they’ll want to primarily see that the seller
will be able to deliver the property free of any liens, and secondly
that they property doesn’t lie in any special tax zones that
could affect your qualification status. In other words, if it’s
in a flood zone, they’ll need flood insurance – that
could cost you an additional $100/month which could ultimately affect
if you can still afford the loan.
Packaging yourself
Especially in a buyer’s market, which the better half of
2006 has definitely been, agents are often arguing the fact not
that they have an offer that a seller can’t refuse, but that
they have a buyer that the seller can’t refuse. With interested
buyers being relatively few, a well qualified, motivated buyer is
indeed a rare commodity. Therefore, like “Agents” in
other industries, our job is literally to showcase you as the superstar
buyer that you are – the buyer than can solve the seller’s
problems!
With this in mind, the minimal items
that you should bring with an offer are the following:
A solid offer with realistic contingencies (i.e. a standard
or reasonable time-frame on contingencies)
A pre-approval letter (to demonstrate your buying power)
Any additional considerations clearly demonstrated: for example,
if you have a home to sell, the terms of that sale in addition
to marketing material to show that your home has value and will
sell.
