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The real estate purchase contract is the most important instrument in the homebuying (and selling) process. As a homebuyer, you will collaborate with your realtor to submit the best offer you can create given your current circumstances. It is important to utilize and lean on your real estate professional to help navigate the purchase contract and to also seek legal advice if you see fit. It can be beneficial to obtain some insight to the terms that you can impact before getting started, especially if you are a first-time homebuyer seeing the contract for the first time. Let’s dig in and break down a couple of significantly impactful pieces to the real estate purchase contract.
Get the Financials in Order
Money talks. One of the primary aspects of the purchase contract is going to be the offer price. Determining the price to offer on a property as a homebuyer will depend on quite a few factors, lean on your real estate professional to help walk you through coming up with a competitive number that you are comfortable with. Earnest money is the secondary aspect of the purchase contract that will directly involve currency. Earnest money is a good faith deposit made by the homebuyer to demonstrate to the seller that they are serious about purchasing the home. Earnest money typically equates to 1% of the contract price. It is kept in an escrow account for the duration of the homebuying process and at closing will be applied towards the purchase.
Financing is critical. Another key aspect to the purchase contract will be the financing portion. Here, you will dictate what your source of funding to purchase the home will be. It's crucial to have a mortgage loan pre-approval from a reliable mortgage lender to go along with your offer to provide proof that you can obtain financing for the purchase. This part of the process lets the seller know that there won't be any financial issues down the road that may jeopardize the sale. Buyer's financing, or lack thereof, is the number one reason that real estate transactions fall through. This means the average seller is already skeptical of your financing before you submit your offer. Do your due diligence and alleviate that.
Don't Sleep on the Home Inspection
Protect your investment. Up next is the inspection portion of the purchase contract, arguably the most important part of the entire homebuying process. As a buyer, you will want to have your future dwelling inspected by a professional, licensed home inspector to ensure nothing major is wrong with the property. What this means from a contract standpoint is that you will be making the purchase of the property contingent on a satisfactory inspection period. You can choose the length of the inspection period (how long you have to get the inspection done and to send any repair requests to the seller) and what type of inspection you require whether it be just one aspect of the home or the entire home that you're inspecting. Typically the inspection period can be wrapped up in one week, depending on the inspector's findings, but it is an essential part of the process that you will not want to skip. In extreme markets, it can be beneficial for a homebuyer to waive the inspection contingency to make their offer stronger, but that is not recommended unless absolutely necessary.
To Wrap Things Up
To a homebuyer, the roughly 10 page long real estate purchase contract can be intimidating, especially as a first-time homebuyer. This is a legally binding agreement that will outline the terms and conditions for the home sale. For this, and many other reasons, it is imperative that you work with a real estate agent to help guide you towards a successful home purchase. Always consult legal advice if you need specific assistance with concepts outside your realtor's area of expertise. Purchase Price, Earnest Money deposit, source of financing, and the Inspection contingency are just a few of the many aspects of the contract that will be addressed.
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