THE REAL ESTATE CONTRACT

There are a few things you need to know about the real estate contract. This is generally a form that gets filled in by the Real Estate Agent. You will have to name a price that you wish to offer and the amount of money that you plan to borrow. The earnest money is usually a small percentage of the amount of the contract and, when making an ordinary offer, is paid upon acceptance of the contract. If paid on a foreclosure, it is due at the time the contract is presented.

There are usually two contingencies that a real estate contract will require. One is that the home appraisal meets the price of the home. This is usually built into the real estate contract but you will want to be sure that it is added into your contract if it is not already there.

There is also a contingency for title insurance. This means that the seller must provide the buyer with a title insurance policy that will insure that the seller is able to sell the house and that the buyer purchased the correct property.

Other contingencies that exist with a contract are those for financing. This is usually filled in on a contract and gives the buyer 30 days or so to get approved for financing. If you have a pre-approval letter, you can skip the financing contingency, although you’re always better off to have this as part of the contract in case you end up requiring another alternative.

You should also have a contingency for a Home Inspection. This is important even if you are buying a new home. The house should pass the home inspection and show no significant structural damage. This can be worded in the contract. Housing Inspections are rarely perfect, and there is bound to be some fault with the home, such as the faucet leeks. If your contract is contingent on passing the Home Inspection, you can ask that the seller fix unsatisfactory items on the Inspector’s Report.

Another contingency you may want under certain circumstances is the attorney review contingency. This gives your attorney some time (usually three days) to review the signed contract. This does not go into effect until the contract is signed by both parties. The attorney cannot adjust the price.

Other aspects of the real estate contract include the items that are being sold with the house as well as Tax Prorations and Closing Costs. There will also be a time element involved in the contract so that you cannot linger forever upon closing. The seller gets to pick the place where the title insurance will be purchased and where the closing will take place.

Another contingency that is sometimes seen in real estate contracts is a contingent on sale or contingent on close. If a buyer has another house to sell or is waiting for their house to close, a Rider is attached that gives the buyer a certain amount of time (usually 90 days) to sell or close (usually 30 days) on a house.

As the buyer, you will be the first to sign the real estate contract and then your Realtor will present it to the agent of the seller. If approved, the seller will sign it and you will each get a copy (the contracts are usually signed in duplicate).

The seller has three choices when presented with your contract. He or she can refuse the offer by simply not signing the contract; they can counter-offer at a higher price by crossing off your price, adding their own and initialing, while signing the contract; or they can accept the contract as is and sign it. They can also make any other changes in the contract as long as they initial the changes. The contract then comes back to you. You can either accept the changes, tell them the deal is off, or make further changes, initial and sign again. In some cases, the contract goes back and forth a few times before it is fully negotiated between the buyer and seller. Rare is the case when a contract is not amended in any way.

Once the deal is set, you are then ready to start the closing process.

Until next time…
Take care of yourself, and those around you!

TX Veteran,
REALTOR ROB

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