As a first time homebuyer everything is new, exciting and can easily feel a bit overwhelming. Arming yourself with knowledge is the first step in minimizing any intimidation you may feel and allow you to stride confidently forward into the marketplace.
Your First Contract!
Even with an agent right there explaining as you go, and even if you are comfortable with contract terms, the fact is, there is an emotional element to purchasing a home and you may be distracted by those emotions. In the real estate industry, terms used are often industry specific and you may not be familiar with many of them. Understanding the basics of a real estate contract will help reduce your stress during this exciting time in your life.
Your real estate contract is typically bilateral, which simply mean they are comprised of two parties who are in agreement. These parties are commonly called Sellers; the current owner of the property and Buyers; that’s you, the party that wants to own the property.
Even when you or the seller are represented by agents, the contract will identify each of you and usually include the agents representing each party at the end of the contract.
The legal description of the property along with the common address will be clearly identified. While most people assume any fences are the boundaries, it is always a good idea to have your agent verify the property boundaries. If there are questions about the boundaries, you may want to have a survey done to clearly mark the boundary lines.
The price you are offering for the property. The price the property is listed for is not part of the Purchase and Sale Agreement. The only price a contract addresses is the agreed upon sale price.
The terms of the sale will be spelled out so both parties are aware of their responsibilities to complete the contract. This can be as simple as sale price and closing date or complicated and spelled out over many pages. Most real estate sales include disclosures from both buyer and seller.
SELLER – will be disclosing facts they know about the property along with other legally required disclosures
BUYER – will be required to disclose the source of the funds being used to purchase the property whether all cash or through a lender
All contacts must have a legal purpose, must be entered into voluntarily, and must be between parties of legal age and legal mental competence. Any contract that requires illegal activity or is entered into by a minor or an adult who is incapacitated by drugs or alcohol is not enforceable.
Usually, original signatures are required, but with the more widespread use of electronic signatures, many states are allowing a contract to be enforced with only those eSignatures.
Real estate contracts may contain other terms relevant to the sale, all of which are negotiable between buyer and seller. Inspection clauses, closing dates and other time lines involved as well as Earnest Money escrows can all become a jumble in the excitement of buying your first home. You’ll appreciate the cool headedness of representation watching over the details to ensure your best interests are served during this time.