The Purchase Contract
The purchase contract is the legally binding document that sets forth the terms of the sale, establishes the rights and obligations of the parties involved, specifies the actions to be taken in order to close the sale, and establishes the time frames for those steps to be completed.
A contract is created when there is a "meeting of the minds" on all terms. The contract is created when the buyer and seller have come to such agreement and signed the offer form along with any counter-offers and addenda. Real estate contracts must be in writing; verbal contracts to purchase real estate cannot be enforced. Prior to signing a contract to buy or sell real property it is important to understand all of the terms to which you may be obligating yourself.
Typically standard pre-printed purchase contract forms are utilized and filled out by the real estate agents handling the transaction or by the principals if there is no agent involved. While most buyers and sellers are usually fully aware of the terms such as price, closing date, and financial terms, there is tendency to overlook much of the pre-printed portion of the form. Since all the terms of the contract can be binding it is important to understand all of the terms that you are agreeing to before you sign the contract. Not doing so can be a costly mistake, especially if there are problems or difficulties in the transaction.
Some of the items that you may be agreeing to when you sign the pre-printed form may include:
•What personal property will be included or excluded from the sale
•Who will pay for required repairs or retrofits
•What the seller's disclosure obligations will be
•What the seller's obligation to maintain the property will be
•What the seller is warranting about the property
•What the buyers inspection rights will be
•What will happen in the event either party does not comply with the contract
•What the parties legal rights and attorney fee provisions will be in the event of a breach of contract
It is highly recommended that you read and review the pre-printed forms used most commonly in your area before you have an offer to purchase from a buyer. Your real estate agent can provide you copies of the forms and should be willing to explain and review them with you. When you have a bona-fide offer being presented your focus will be on issues such as price, terms, and closing date.
By reviewing and understanding the purchase contract form ahead of time you can strengthen your negotiating position, protect yourself from incurring unnecessary costs or problems, and have a better understanding of what you will need to do to conclude the sale.