Important Provisions for a Home Buyer in a Home Purchase Agreement
UPDATED: November 6, 2013
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The purchase of a home is generally the most important and expensive purchase that you make in your lifetime. So your real estate contract will contain key and important provisions, terms and conditions to protect your interest. Read the contract fully and carefully. Make sure you understand what it says. (With that in mind, it makes sense to consider having an experienced real estate professional or attorney review the terms to make sure it is in good shape and protects your legal rights.)
Normally the most important provision in a real estate contract for the buyer (as well as the seller) is the price to be paid for the property. The buyer will want to pay as little as possible and the seller will want as high of a price that he or she can receive.
The time for the close of the escrow where title is transferred to the buyer from the seller is quite important as well as the name and location of the escrow company that will handle the paperwork.
Home inspection clause
The contract should also include a standard clause that enables the buyer to have an inspection made of the property within a certain period of time by third parties, such as home and pest inspectors, roofers, engineers, surveyors, contractors, and the like. The inspection is to make sure there are no hidden problems affecting the integrity of the home.
Buyers should have within the contract a requirement that he/she has to approve the physical condition of the property within so many days of the written report of the expert. An example of that type of clause would read as: "The buyer has the right to have third party inspectors inspect the property as to the integrity of its condition within 20 days after the parties are in contract and the buyer must agree in writing with the seller that based upon buyer's review of the inspection reports that the buyer waives any and all further inspection of the property and agrees to go forward in purchasing the property."
Loan contingency clause
Another important provision is a loan contingency clause (purchase is conditioned on the buyer getting financing) to buy the property. An example of this clause is: "Buyer and seller agree that buyer's purchase of the real property described in this purchase agreement is subject to the buyer receiving written approval from a lender to purchase the desired property and upon receiving this approval from the lender, the buyer shall remove this requirement in writing within 5 days as a condition for buying the propety set forth in this agreement and provide a signed copy of this condition to the seller."
If the financing falls through, the buyer can elect out of the contract without any further obligation to buy the home.
The contract can also spell out who pays the "closing costs" for recording the deed, title insurance and escrow fees, not just state "per county custom. Then the buyer has a clear idea of the financial costs of closing. When the market is a buyer's market, the seller of real property will be more motiviated to agree to pay some of these costs in order to ensure that the sale concludes.
Benefit of having written contingency waivers
The contingency waiver of certain aspects of the sales transaction is a huge safeguard for the buyer. It should allow the buyer to terminate the deal and receive a full refund of the deposit if s/he
(1) is unable, despite good faith efforts, to obtain financing within an agreed upon time at prevailing interest rates
(2) discovers any serious mechanical problems or environmental hazards with the house
(3) discovers any other serious problems that could not have been discovered before signing the contract.
Pre-printed purchase contracts
Many real estate associations have drafted over the years their own pre-printed purchase contracts, usually between 6 to 8 pages in length that incorporate many of the standard provisions desired in a real estate purchase contract by both the buyer and the seller. Over the years these contracts have been modified as new issues develop in the area of real estate sales. Sentiment is that the pre-printed forms that have provisions for additional terms and conditions between the buyer and seller are tried and true forms customarily utilized by licensed real estate agents time and time again and should be seriously considered by both the buyer and seller in a real estate transaction as the format for their written agreement.