Buying a home in the Meridian area, whether it is a starter home, your “forever home” or a downsized home, is an exciting experience. However, real estate contracts are complex legal documents. It is important to understand what some common contingencies in purchase contracts are, so you can make informed decisions before signing on the dotted line.
Interest rates
Most people buying a home need to take out a mortgage, which will have a certain interest rate. It is important to research this rate before making a purchase offer. If you ultimately cannot get a mortgage at the interest rate included in your offer, the seller may be able to keep your earnest money deposit if you have to rescind your offer.
Closing costs
If the buyer wants the seller to pay for some or all the closing costs associated with the sale of the property, this must be included in the offer. Closing costs are expenses that are tacked on to the price of the property itself that the buyer normally bears. Closing costs in a real estate contract should be noted as a specific dollar amount or a percentage of the purchase price.
Home inspection
It is advisable to have the property professionally inspected for potential structural problems prior to purchase. For this reason, many people include a home inspection as a contingency to the purchase of the property. If the home inspection reveals significant flaws in the structure of the property, such a contingency may allow the buyer to rescind their offer.
The sale of your current home
If you already own a home that you are selling in order to obtain the funds needed to purchase a new home, the new home offer should contain a clause stating that the purchase of the new home is contingent on your ability to sell your existing home. Generally, these clauses will have a reasonable time limit in which the buyer’s current home must be sold.
Seek professional guidance with your purchase contract
Ultimately, real estate contracts are legal documents, and the failure to either include essential contingencies or meet contingencies included in the document can be detrimental to the buyer, seller or even result in the falling through of the sale altogether. This post does not contain legal advice so if you are buying or selling a home, you may want to have a professional review any real estate documents to ensure they are fair, comprehensive and enforceable.