When you are finally ready to buy the property that you’ve been dreaming of, you have to prepare a paper that includes more than just your name or your address. This is what we call the sale contract. The main purpose of a sale contract is to outline the agreement that goes on between the buyer and the seller. It is for their own protection that a sale contract is being produced. Without it, both the buyer and the seller may face some perils during their negotiations.
Buying property is after all, like marriage. Like purchasing property, a matrimony also involves a contract. Any breach of contract may lead to separation or divorce. In this case, a breach in a sale contract may lead for the property to be unsold.
To help you with the “proposal stage” of buying property, we listed down the factors that should be included in your sale contract. Hope you’ll finally lock down that property after reading this article.
1. The Basics
Here are the basic terms that should be included in the contract:
- Legal description of the property. This can be the address or the location of what you want to buy.
- The price of the property.
- The type of transaction that’s going to happen. Is it an all-cash transaction or are you planning on paying through mortgage?
- The seller’s promise that he or she will provide a clean land title.
- Amount of money deposited.
- The type of deed that will be granted.
- How the seller and the buyer will divide the fees for taxes and utilities.
- Environment tests
- Termite inspection
- A stipulation that allows the buyer to do a last minute walk-through around the property.
2. Contingencies
Contingencies mean that a purchase will only happen if the following event occurs. Here are the two of the most common contingencies that buyers often face:
- Financing – If the buyer is not able to secure a mode of financial security (like locking down a mortgage) then he or she won’t be able to purchase the property.
- Home inspection/redecoration – The buyer may not purchase the property if the seller was not able to get the property approved by a home inspector or the requested redecoration or renovation did not happen.
3. Earnest money
Earnest money is your show off money. This is the deposit that you put down in spirit of your seriousness to buy the house. Earnest money should be deposited on a third party bank account with a written agreement attached to it.
4. Settlement date and possession
The contract should also include the date in which you are going to move in or settle in the house. Settlement can happen during the time wherein the land title and the mortgage are being processed which usually happens 45 to 60 days. Meanwhile, possession may happen right after the settlement.
5. Which fixtures and appliances should go with the house
What should be included in the house should also be written in the sale contract. Do not rely on verbal agreement during the time when you requested the seller the sole possession to the refrigerator, the washing machine, the stove, and other fixtures.
6. Closing date
Closing date means the time frame in which the purchase of the house should be made. It can be up to 30 to 45 days. The closing date should include the time wherein the owner of the house will find a new home, let go of the renters if the property is being rented, and finishing the buyer’s time on his lease if he’s renting.
Remember that when dealing with sensitive contracts like this one, you should seek the help of an expert. Consult your real estate agent if you do not understand any terms that are included in a sale contract or if there are more clauses that has to be included.