When you are ready to make an offer to purchase a home, your real estate
agent will complete a purchase offer, which you will sign. If the offer
is accepted, the sellers will sign it. At that point, you have entered
into a binding agreement.
But before you make an offer to buy a home, we recommend that you get to
know the contract you're about to enter into by asking your real estate
agent for a blank copy of the contract he or she uses, studying that form
carefully, and asking your agent questions about terms or clauses you don't
understand. That way you're prepared to move and offer quickly when you find
the right home. Remember, just because something is written in the contract
doesn't mean it can't be crossed out.
While there is no one "standard" home loan purchase contract, there are a
number of terms that every contract should and will include.
Good-faith earnest money deposit.
Although this is not required, an offer that does not include this proof
of your willingness and commitment to buying the house is weak. Typical
deposits range from 1% to 5% of the purchase price; often, this small
deposit is increased after all inspections of the property are complete
and the contingencies have been removed. A large deposit check, held in
a trust account that the seller can't access, can act to strengthen an
Inspection contingency clauses.
Smart homebuyers and real estate agents insist on a contingency period
for professional inspections. You have the right to inspect the property
at the same time as the professional inspectors, and in fact, that is
recommended. If you don't approve an inspector's report, or if the
seller won't correct problems you need fixed, the purchase can be
canceled and your good-faith deposit returned.
Unless you're paying all cash for a property, you'll want to include a
mortgage finance contingency clause. This gives you time to be
absolutely sure you can get the loan you need to finance your purchase.
Even though you may be pre-qualified and pre-approved, your lender will
still need information about and an appraisal for the property you're
purchasing. If for some reason you are unable to secure a loan for the
property - if the appraisal is less than the property price, for
instance - the mortgage finance contingency clause allows the purchase
to be canceled and your good-faith deposit to be returned.
The purchase offer should specify which personal property items you
would like included with the structure in the purchase. Examples may
include appliances, window coverings, screens, carpets, TV antennas, and
The terms above, and the two contingency clauses in particular, are usually
more than enough to protect you as the homebuyer. However, some buyers also
prefer to include a clause (an "all-inclusive weasel clause") that allows
time for your attorney or financial advisor to review the contract after it
has been accepted.
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