Creating a Powerful Home Purchase Agreement
QUESTIONS TO ASK YOURSELF (home purchase agreement)
How does the home purchase agreement affect the closing?
The home purchase agreement is the governing document of the transaction.
Not only does it specify the price you’ll pay for the property, it also gives the terms.
Indeed, closing usually means completing the terms of the purchase agreement.
Was the buy understanding composed by an authorized and experienced operator?
Besides the price and the amount of the deposit.
it also indicates whether or not you’ll get financing (and what kind) as well as any other terms and conditions of the deal.
It should even mention any personal property, such as a chandelier, that might be included.
Anything that’s left out won’t be part of the deal.
To be effective, the agreement must be signed both by you and by the seller.
meaning that it has to accurately reflect the seller’s desires as well as yours.
For that reason, it is difficult to write a home purchase agreement that reflects everyone’s concerns.
Usually a competent and experienced real estate agent (or attorney) is the best person to handle it.
Did an attorney check the document?
The purchase agreement is intended to be a legally binding document. Once you sign it, presumably you’re on the hook for what it says.
If you aren’t properly protected by the language of the document, you might not get the property.
Indeed, it might cost you money.
It could even result in your becoming involved in a lawsuit.
Therefore, it’s important that the document be properly drawn.
and the best way to be sure that it has been is to have it examined by a competent attorney. In an effort to avoid legal
entanglements, today’s purchase agreements are typically 5 to 10 pages long and are filled with boilerplate legalese.
Often most of the terms are agreed to simply by checking a box.
Nevertheless, the devil is in the details, and you want to be assured that the boilerplate language is appropriate and that the right boxes have been checked.
Have an attorney look it over.
The few bucks it costs will be well worth it.
Is the property address correct?
It’s surprising that more people don’t buy the wrong house because of an incorrectly written address.
It’s easy to write the wrong address.
And always remember that the address tacked onto the outside of the house could be inaccurate.
The address 2124 Maple Street might actually be 2421 Maple Street.
While a wrong address can easily be corrected later in the transaction as long as both the buyer and the seller want the deal to move forward.
a seller who wants to back out can use an incorrectly written address as a wedge to scuttle the deal.
Further, remember that the street address is not the legal address of the property—it is only a convenient designation used for mail delivery, fire protection, and other similar purposes.
The legal address is a description such as “lot 41, map 24, of the Smith subdivision recorded in book 29 of the city of Mapleville.”
In fact, as soon as you open an escrow account, a title search normally will be conducted, and part of the reason it is accomplished at the very beginning of the closing procedures is to verify the legal address.
You should be shown the address and asked to corroborate its accuracy.
Your agent and attorney can help you here.
Just to be sure that the address doesn’t present a problem, many agents will identify the property by its legal address (if they know it) or next best (if they don’t) by referring to the property as “commonly known as 2124 Maple Street.”
Am I putting up a sufficient deposit?
Your deposit is technically called earnest money.
Its purpose is to show that your intent to purchase the property is sincere—in other words, that you are acting in earnest.
Presumably, the amount that you put up should reflect just how earnest you actually are.
The larger the deposit, the more sincere you are presumed to be in making the purchase.
The smaller the deposit, the less determined.
Ideally, you want to put up a deposit big enough to impress the seller with your sincerity in making the purchase but small enough.
so that if for some reason you lose the deposit.
you won’t be severely hurt financially.
That’s the theory.
In today’s market, however, with buyers having weeks to remove inspection contingencies.
give approval to the seller’s disclosures, and get financing, the initial deposit isn’t nearly as important.
After all, the seller knows you probably have many ways of getting out of the deal, at least initially, without the penalty of a lost deposit.
Therefore, a smaller initial deposit may be just as acceptable as a larger one.
Why does the home purchase agreement call for an increase in my deposit?
Some contracts that offer an initially small deposit call for a hefty increase in the deposit amount after the usual contingencies (inspection, disclosure, and financing) have been removed.
The reason is that at this point, if you refuse to go through with the purchase, the seller may indeed be entitled to keep your deposit.
The deposit amount, therefore, now carries far more weight.
The seller is asking you to now increase your deposit to prove your sincerity in intending to complete the transaction.
By complying, you will show you are in earnest because you will have far more to lose if you don’t follow through with the deal.
If you harbor any hopes of backing out of the deal, increasing your deposit is not something you want to do.
If you’re not clear on your home purchase agreement situation, be sure to have your attorney explain the consequences of backing out of the deal.