The Purchase Agreement –
The Essence of your Transaction
Robert Ramirez, Broker Associate
RE/MAX Marina Realty
(707) 762-5611
www.petalumahomes.com
Robert@petalumahomes.com
The purchase agreement is the central document of your Real Estate
transaction. In essence it contains the purchase price offered,
the timeline of the escrow 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 purchase agreements contain similar contingencies- conditions
of sale that must be in order for the sale to consummate.
Contingencies
The three most important and common contingencies of sale are
the buyer’s loan approval, the pre-liminary title report and
the physical inspection of the property, which are all subject to
the buyer’s approval.
The loan approval process - this contingency
is usually 17 days from acceptance of the original offer. During
this time period, the buyer’s lender will order an appraisal
on the property, review the property’s preliminary title report
and complete any last minute paperwork. Usually, most buyers are
“pre-approved” before even writing their offer; their
credit report has already been approved, their income and employment
verified, as well as their down payment.
The Preliminary Title report - this report is prepared
by the title company, and shows important facts about the property:
the owner of record, the legal description, easements for public
utilities, driveways or rights of way, road maintenance agreements,
CC&R’s (covenants, conditions and restrictions), property
taxes, special assessments, and any liens of records that the seller
will be paying or the property may be subject to. The buyer and
lender will be obtaining title insurance based on this document
after close of escrow. The buyer usually has 5 days within receipt
of the report to object to any items of record in the report. If
the buyer has any objections to the title that cannot be removed
(an easement for instance) then the buyer may cancel the escrow.
The physical inspection contingency of the contract is the “discovery
period” whereby a purchaser learns everything about the property
by reading disclosure reports prepared by the seller and ordering
and reviewing any and all inspections. Contrary to popular belief,
so long as there is a physical conditions contingency, no sale is
an “as-is” sale. While the purchase agreement may state
an “as-is” sale, a buyer always has a right to obtain
any inspections they deem necessary. The time frame to conduct any
inspections is typically 17 days from acceptance of the offer. During
this time the buyer will have the right to perform any non-destructive
(unless separately agreed upon) inspection they desire in order
to determine if they wish to continue with the purchase. During
this period, the buyer will also obtain a quote for homeowner’s
insurance to determine that the home is insurable, and at what cost.
The most common physical inspections are:
Structural Pest Report: This is 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.
Roof, Chimney, Foundation, Electrical, Plumbing Inspections:
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) a buyer definitely
wants to make sure that the 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 have the water tested for bacteria, nitrates or contamination.
Generally, most buyers will also want to review the county records
of country property, particularly if they want to remodel their
homes, build accessory dwellings, or raise animals.
Whatever the case may be, an experienced Realtor can guide a buyer
through the contingency period of a contract with relative ease.
A Realtor can explain the options available to the buyer and negotiate
terms with the seller that can mitigate any potential issues in
the property’s condition, and has what it takes to represent
their clients’ best interest in the purchase or sale of any
property. So don’t be penny wise, and pound foolish—use
a Realtor in your next real estate transaction.
|
