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A real estate purchase agreement is the legal document that protects seller rights when working with a homebuyer. Some specific terms and conditions protect the rights of both parties when engaging in a significant transaction such as this one.
It is essential that you get your real estate purchase agreement right to avoid future complications. The article below describes everything you need to know about real estate purchase agreements:
What is a Real Estate Purchase Agreement?
Real estate purchase agreements, also called real estate contracts, home purchase agreements, real estate purchase contracts, and house purchase agreements, are legal contracts between a buyer and seller for a home sale of real property.
A real estate purchase agreement doesn’t transfer the title of a property. Rather, it is the document that builds and creates a framework of the responsibilities of each party during the transaction so that the title can be transferred in a way both parties are happy with.
Who Needs a Real Estate Purchase Agreement?
You need a real estate purchase agreement if you are selling or buying a house. Depending upon your situation, the person who provides the real estate purchase agreement may vary. You generally have two options when selling a home:
- Represented by a real estate agent
- For sale by owner (FSBO)
Represented by Agent
If the home seller is represented by an agent or Realtor, then the agent is generally responsible for drafting the agreement and arranging for a signing. Typically, the registered agent will go through their attorney to get a copy of the real estate purchase agreement initially since they do not have the authority to give legal advice.
For Sale By Owner
If the seller decides to forgo the added cost of a real estate agent, then the seller is directly responsible for handling the real estate purchase agreement. This strategy allows you to maximize your profits and returns by not paying traditional commissions. However, you are still liable for ensuring that your real estate purchase agreements are legal and valid at the local, state, and federal levels.
Here is an article about for sale by owner (FSBO).
Who Provides the Real Estate Purchase Agreement?
The real estate lawyers of the seller draft the real estate purchase agreement. Since real estate agents are not licensed to practice law, they cannot legally create contracts by or for their clients. Only a licensed attorney in your specific state can offer legal advice when it comes to contracts.
Key Terms in Real Estate Purchase Agreement
There are several key terms in a real estate purchase agreement that you should include and understand to guarantee that your transaction goes as smoothly and quickly as possible. You will also want to ensure that your contracts are enforceable and valid to avoid futured disputes.
Key terms in a real estate purchase agreement include:
Key Term 1. Buyer and Seller Details
Get the contact information of the other party, including their address. This information should match the information on file with the court clerk’s office. For more than one buyer involvement, they should determine if they will purchase as joint tenants or joint tenants in common.
Key Term 2. Property Details
Properly identify the property being sold, as well as the exact address, legal description, and other necessary information. You can obtain copies of these through the county court clerk’s office. They can provide you with the copies of documents that you need for a real estate purchase agreement, such as a warranty deed, deed of trust , or quitclaim deed.
Key Term 3. Purchase Price
You must also negotiate the purchase price with the buyer beforehand as well. The terms and conditions must include how much they will pay, including real estate tax, as well as how they will be paying. Popular methods of homebuying include cash payments, down payments with a mortgage, or a new mortgage.
Key Term 4. Representation And Warranties
You must also give the buyer reassurance that the claims you are making in the real estate purchase agreement are accurate. After all, they are making a major purchase, and buyers have a legal right to specific assurances. Your real estate purchase agreement will need to guarantee that the statements contained within are true and accurate.
Key Term 5. Financing
If the home buyer is financing the home with a loan through the seller or HUD financing, you will need to include the specifics of the transaction related to the loan, including:
- Annual percentage rate (APR)
- Balloon mortgage payment
- Default terms and conditions
- Debt-to-income ratio requirements
- House flip terms and conditions
- Closing costs and title insurance fees
You are assuming several risks if you offer seller financing. However, you can stand to gain a massive return on your investment. The most practical way to ensure that a buyer does not get away with violating your rights, create specific financing terms that are flexible enough for the market without taking away from your rights as a seller.
Image via Pexels by Binyamin Mellish
Key Term 6. Contingencies
A real estate purchase agreement’s legalities are based upon the fact that specific conditions are met. Some of these contingencies include inspection, appraisal , financing, and title contingencies. The inspection contingency is one of the more time-consuming aspects since the results of a walkthrough and appraisal largely affect a significant portion of the transaction.
Key Term 7. Lead-Based Paint Disclosure
If you are selling a home that was built before 1978, then you need to let potential buyers know if any areas contain lead paint in a lead-based paint disclosure. They have a legal and fundamental right to know if they are being exposed to hazards. Many states have their own legislation on disclosures which means you should get legal help from real estate lawyers regarding compliance.
Key Term 8. Dispute Resolution Clause
A legal dispute can arise at any given moment. It is for this reason that we address how to handle disputes and dispute resolution clauses in real estate purchase agreements. If you wish to keep legal disputes fairly inexpensive and away from public record, use alternative dispute resolution methods, such as a mediation or arbitration, if a real estate lawyer thinks it makes sense to do so in your specific situation.
Key Term 9. Earnest Money Deposit Amounts
Buyers make an earnest money deposit to demonstrate their ability and desire to purchase your home. This process usually involves depositing money into an escrow account until the mortgage note closes. Until you receive an earnest money deposit amount, you can continue running your advertised home listings.
You may need to insert additional language into your contract depending upon the transaction and geographical locations. Laws in home sales vary from state to state, which means that you will need to incorporate relevant requirements into your real estate purchase agreements. Get help with a real estate purchase agreement by working with a legal professional.
Get Help With a Real Estate Purchase Agreement
Get help with a real estate purchase agreement by speaking with real estate lawyers. They will ensure that you create an enforceable and legally binding document when selling your home, as well as advising on other local laws you should be aware of. For example, there are other critical laws that affect your ability to be approved for a mortgage, including guidelines set forth by the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA) .
You Deserve Fair Terms
Unsavory lenders, as seen in the Fannie and Freddie cases, can take advantage of your vulnerable positions. Homeowners may also look toward making a quick buck. Do not let them gain the upper hand when engaging in one of your biggest lifetime expenses, so hire a lawyer to protect your rights from the outset.
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