Home Sale Contract: A General Guide

A home sale contract is a written agreement usually signed between a seller and a homebuyer for a home purchase anywhere in the U.S. based on some rules. It is an important real estate purchase agreement that helps all home sale parties avoid any post-sale issues. Examples include a faulty title or a termite infestation. Buyers and sellers also have a few options to create the final agreement, which can be done by hiring a real estate lawyer.

Note: To learn more about a home sale contract, click on this video link.

Important Elements of a Home Sale Contract

An experienced real estate attorney always understands real estate transactions and their associated aspects. This means the lawyer also knows what to include in the home sale contract. Another option to continue with the process is through a standard form. For this, the interested parties must know about the following elements of the same contract:

• Due Diligence: The homebuyers should do their due diligence before entering into a home sale contract. They must not solely rely on the realtor or homeowner to provide all details on the specific home's condition. Resources such as a professional home inspector or title insurance can help buyers avoid issues.
• Title: The titles on most homes are transferred via a warranty deed. So, the homebuyer should contact a title company for such kinds of title search. Warranty deeds always confirm the seller is the rightful owner of the specific property. Title companies, on the other hand, search public records to confirm the rightful owner. They also ensure there are no encumbrances on the real property. Title searches usually give details on the following:
  • Liens
  • Property tax assessments
  • Restrictive covenants
  • Easements
• Title Insurance: It provides an extra layer of protection in certain situations when the title report is incomplete. For example, the lienholder has a superior claim to the property if a title search overlooks a lien. The buyer can always clear up the associated lien and the title with the help of title insurance.
• Inspections: Buyers and sellers always rely on good faith in all kinds of real estate transactions. That is why both parties should contact professional home inspectors to confirm the condition of the said property. Home inspectors can further check for mold, asbestos, termites, damage, and potential structural problems. The inspector will create a report after the home inspection process. Both parties will access an objective inspection report before agreeing to the home sale contract.

Components to Include in a Home Sale Contract

All real estate transactions are different. So, it is quite obvious that not all home sale contracts will look the same. However, interested parties must make sure of certain basic items that should be included in every legal document of this kind:

• Buyer And Seller Information: A home sale contract will include the full names of all of the buyers and sellers involved in it. The same contract will also include contact information for all involved parties for future purposes. Sometimes, there is a chance that the document may include additional information about the buyer’s family members, too.
• Property Details: The contract will include all kinds of information about the property that is to be sold. This includes the physical address and a brief description of the same property. Moreover, it must add other important details about the property to ensure that everyone is on the same page.
• Mortgage Terms: A fresh home sale contract will include information about how the specific property will be paid for. A buyer will need some sort of financing, like a mortgage loan, to buy the home, especially if they are not paying in cash. So, the specifics of these payments will be written out in the contract.
  • Contingencies: Different types of contingencies can be included in home sale contracts from both the buyer and seller’s side. This helps everyone understand any contingencies that are included in the specific home sale contract. Contingencies are some of the most important conditions that must be met before the sale of the home can go through. A few common ones include:
  • Financing Contingency: This specific contingency implies that the property sale is contingent on the buyer, who must be able to obtain financing. This specificity protects the same buyer if they cannot qualify for a mortgage.
  • Inspection Contingency: This means that the buyer can back out of the home sale contract without penalty. This applies if they are not satisfied with a professional inspector’s assessment of the same home.
  • Appraisal Contingency: This particular contingency states that the home must appraise at a value higher than or equal to the agreed-upon sale price. The buyer might struggle to find financing if the appraisal is less than what was expected.
  • Home Sale Contingency: The home purchase is contingent on the buyer’s ability to sell their current home in a home sale contingency. The purchase agreement will be invalid if the buyer cannot sell their home within the agreed-upon timeframe.
  • Title Contingency: This particular contingency means the buyer can leave the home sale contract if the specific property is not clear of liens. Buyers must work with a title company to review the associated title report of the home. This helps them ensure that no one other than the seller has a claim to the specific property.
• Earnest Money Deposit: Earnest money shows that a buyer is serious about buying the home. Sometimes, it is also referred to as a good faith deposit. Sellers never want to waste their time. All they want is to know whether a particular buyer is going to stick with the home sale contract through closing. The earnest money deposit further helps give them that confidence.
• Closing Costs: Certain fees and costs will need to be paid as the home sale contract gets signed. The amount to be paid by each party will depend on what was negotiated in the contract. Closing costs may include the appraisal and inspection fees, the origination fee, lenders fees, taxes, and insurance.

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Key Terms for Home Sale Contracts

• Closing Costs: The expenses related to the underwriting of different real estate commissions, taxes, mortgages, insurance, and even record filing, including their origination.
• Contingencies: An uncertain occurrence, mostly negative, that may occur in the future.
• Real Estate Appraisal: The valuation of a particular property that may be up for sale.
• Lender: Any individual or entity that provides funds to other people with an expectation that they will be repaid.
• Disclosures: The process of making certain facts known to the public.

Final Thoughts on Home Sale Contracts

A home is officially under contract when both the buyer and the seller sign a home sale contract. Yet, it can be considered just one step in the march toward the closing table. The process usually begins with drafting and reviewing the contract before it is signed by both parties. It happens only after the buyer and seller have agreed to the associated terms and conditions. However, everyone can't have a clear idea of what goes into a home sale contract. This applies especially if they are doing it for the first time. That is why it is recommended to approach a real estate lawyer for such requirements.

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