Reed|Williams
One of the more confusing aspects of buying or selling a home is the contract.
Here are a few tips that can make you feel more comfortable with it.
From inspections to negotiations, there are minutiae to pay attention to and remember when you buy or sell your home. Most of these details are included in the contract that the parties sign, so it is crucial that you understand why some boxes are checked and others aren’t and what the bottom line is in your real estate contract. Chock-full of legalese and mysterious references, it makes you want to give up and just sign whatever is put in front of you. A recent Realty Times article gives several useful tips to understanding what the contract contains.
You may think that the contract is mostly fluffed up legal language, but there can be big consequences if one little thing is incorrect. Additionally, listing agents are usually looking for reasons to reject contracts just as much as they are looking for reasons to accept ones that are beneficial to their real estate clients. Little, seemingly insignificant items can be deal breakers. Detailed below are some of these items that can cause you a lot of trouble or even kill the deal.
Disclosures.
Usually required by local, state or federal law, you may need to sign several forms that have no material effect on your contract, but simply reflect the fact that you have been told certain things. Examples include a property disclosure, Real Estate Settlement Procedures Act (RESPA) disclosure, federal lead-based pain disclosure, disclosure of brokerage relationship, etc. Not signing these can severely affect the transaction.
Inspections.
If you have bought or sold a house, you probably know how crucial inspections are to the process. There are various property inspections buyers can request, such as pest, home, environmental or termite inspections. Requesting these is usually as easy as checking a box “yes.” Keep in mind that there is also a “no” box and if you do not want an inspection, it is important to check this box rather than leaving it blank, so nothing is left to the imagination of any party. Double-check these items, even if your real estate agent completed them for you.
Other Term Clauses.
Three other clauses that need to be spelled out in the contract are home of choice, rent back and escalation clauses. Home of choice and rent back clauses mean that you want to find a home of your choice and that you may want to rent back from the buyer so you have extra time to find the home of your choice. These clauses are important if you don’t want to be stuck in the situation where you have to move out of your old home but haven’t yet found a new home. Remember that renting or staying at a long-term hotel can be expensive. An escalation clause is important if you are escalating your price. For instance, you may say that you’ll outbid any offer by $1,000, but you need to nail down the details so you don’t end up with a price escalation that is far beyond your means. Also remember to make your “top price” your real top price, not just what you think is beyond what anyone might bid. If you want the house, chances are that someone else does too.
As you might imagine from understanding these few components of a contract, it is important to understand the terms of a contract before the actual writing. If you choose to have a real estate agent, make sure you ask him or her to clarify anything you don’t understand. In a home purchase or sale, there are no stupid questions!