A purchase contract is an essential part of the process of a real estate transaction. It spells out clearly all the details of the sale from the property itself to the financial end of things. Purchase contracts are very detailed and legally binding documents and can be more than a little confusing for both buyers and sellers. To dispel some of that confusion, here is everything South Florida buyers and sellers need to know about purchase contracts.
Purchase Contract Overview
Purchase contracts spell out in detail all the agreed-upon under which South Florida buyers and sellers “agree to engage in a real estate transaction. The completion and signing of a purchase [contract] effectively place both the buyer and seller (as well as the property in question) ‘under contract.’” Basically, a purchase contract is a legally binding agreement that lays out the key details of a real estate sale transaction.
When a buyer makes an offer to purchase a home, she will “propose conditions for the sale and spell out the important financial details such as [the] offer price.” The seller will then accept, reject, or negotiate new terms for the offer. After any negotiations involving counteroffers, both buyer and seller sign the purchase contract when they are satisfied with all the terms. “At this time, both the property that’s up for sale and any parties to the agreement (for example, the home buyer and seller) will be determined to be ‘under contract.’”
Purchase contracts signal “the intent of all parties to engage in a home sale transaction and [explain] which conditions must be met for the sale to close and ownership of the property to transfer to the new buyer.” Typically, the buyer’s agent will draw up the purchase contract. Because agents are not attorneys, they cannot create a contract from scratch, so they use a template and adapt it for specific transactions.
To learn more about purchase contracts, you can contact Cooper City Realty at (954) 818-3602.
Common Pitfalls of a Purchase Contract
Here in Florida most real estate agents use the “AS IS” Residential Contract for Sale and Purchase provided by Florida Realtors® where the agent can simply fill out blank fields on the form.
One pitfall that can cause issues is to not fill out every blank on the contract. Even if “N/A” is entered because a section is not applicable, every blank field should be filled. With that said, you also want to make sure the information filled in is correct. This is especially true of the Legal Description of the property.
Another pitfall that causes big problems between buyers and sellers is the section that lists the personal property that is included or excluded. Both buyers and sellers should review this section carefully.
In any contract there are pertinent dates that both the buyer and the seller should be very aware of because it could cause either the buyer or the seller to be in breach of contract.
One of those important dates is the Inspection Period. For buyers, it’s important that you do all your inspections on the property before this date and know whether or not you will be moving forward with the purchase of the house in it’s current condition.
Lastly, but not any less important, the buyer and seller should know what is the amount of the escrow deposit in the contract. As a seller, you would want that amount to be higher. And as a buyer, you would want the escrow deposit to be as low as possible.
Common Elements of Purchase Contracts
Purchase contracts are very detailed documents and specific legal requirements can vary from state to state. There are, though, some common elements that you’ll find in all purchase contracts, for example . . .
- Buyer and seller information – Full names and contact information for all buyers and sellers involved
- Property details – Address, property legal description, and other pertinent details
- Purchase price – “The total agreed-upon selling price for the property, including any deposits or additional costs associated with the transaction”
- Representations and warranties – “Statements of facts made by the seller regarding the condition, structure, and composition of the property that is being sold”
- Financing – Specific details explaining how the buyer will pay for the property
- Fixtures/appliances – Statement about what fixtures and appliances will or will not be included in the sale
- Title insurance – “A note specifying whether the buyer or seller will be responsible for purchasing title insurance to protect against potential discoverable defects in the property”
- Property taxes – “Citations regarding any property taxes that will be imposed on the property that is being purchased”
- Closing date – The exact date on which the transfer of title will take place
- Contingencies – Any condition that must be met before the sale can go through, such as an inspection contingency
- Earnest money – “Terms of any earnest money security deposits that must be made to show the seller in good faith that the buyer is interested in purchasing the property”
- Option to terminate – “[O]ption for the buyer to back out of the deal and terminate the contract up until a certain time before closing”
- Lead-based paint disclosure – Required by law for homes built before 1978
- Signatures – Signatures of all parties involved to finalize the contracts
Purchase Contract Assistance
Purchase contracts are designed to protect both buyers and sellers and ensure a smooth transaction throughout the process. It’s imperative, then, that whether you’re a South Florida buyer or seller you understand what a purchase contract is, what it includes, and what it is intended to do in order to avoid the pitfalls along the way. And the best way to do that is to work closely with your South Florida agent. For any assistance you may need with purchase contracts, contact us at (954) 818-3602.
