Previewing the ContractAsk your Realtor® to review the blank contract form that will be used later to write your offer on a property. Some contract forms are written to favor the seller. As such, you should familiarize yourself with the fine print before you're in the middle of negotiations. Each real estate transaction is different, and many items may be negotiated. You may want to check with an attorney for tips on writing a contract that is in your best interests. Be sure to discuss:
Refund conditions:The conditions under which your earnest money deposit (a good-faith gesture that will accompany your offer) will be returned to you should the sale fall through.
Financing lead time:The amount of time you should allow to secure financing (45 days is reasonable).
Special Conditions:These may include any inspections to be performed on the property, including the name and company of the inspector, the purpose of the inspection, who will arrange for it, who will pay for it, the date it will be completed, and how the results will affect your offer to purchase.
Deed and title:The contract should specify the type of deed the seller will furnish. Although there are several types of deeds, a general warranty deed is the most preferred. In a general warranty deed, the seller guarantees the quality of the title and agrees to protect the buyer from any claims made by outside parties. You should also discuss how you will take title. Refer to the glossary for the definitions of the most common options: title in severalty, joint tenancy, tenancy in common, and tenancy by the entireties.
The contract should include a provision for title insurance, a policy that protects against any defects in the title not uncovered in the title search. Most title insurance protects only the interests of the lender. Ask your attorney about provisions for buyers' title insurance. Again, expenses here are negotiable.
Possession:In most cases, the seller agrees to vacate the property no later than 30 days after closing.
Expenses:The buyer usually pays for the application fee, points, appraisal, location survey, title insurance premium, fees for recording and transfer, and credit report charges. Your lender may also charge a loan origination fee. Depending on the type of financing you require, there may be other charges. The seller of a property usually pays the Realtor's® commission and discount points charged to the buyer by lenders on FHA and VA mortgage loans (see glossary). Payment of points is negotiable.
Taxes and assessments:Review the statement that describes how property taxes, prepaid homeowner's insurance premiums, utility bills, prepaid tenant rent, etc., are to be prorated. In some counties, taxes are assessed six months in arrears, which means they are payable after a six-month period rather than before. You can check the tax rate for a community by calling the county auditor.
Most offers are contingent upon the buyer's ability to secure mortgage loan financing at a specific interest rate and term. In some cases, the offer may be dependent on the sale of another property. Ask your attorney how to cite any contingencies clearly and precisely.
Previewing the contract
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