There is plenty of paperwork associated with a real estate transaction that may seem unfamiliar. Your agent will simplify the legal jargon and make it more relatable as you go along, but in the meantime there are a few documents you should be familiarized with.
Let's go over those now so you'll know which points to pay closest attention to.
Purchase and Sale Contract
Of course, an agreeable contract is the ultimate goal for buyers and sellers alike. The first question a seller will ask is "how much are they offering" which of course is incredibly important. However, the price isn't the only piece of the contract that could make or break the deal. Pay special attention to these clauses:
1. Earnest Money Deposit: Sellers will want the initial deposit to be high to show the buyers are serious. Buyers, on the other hand, will usually prefer to put down a smaller deposit (around $1,000) so as not to tie up their funds. The amount of the deposit not only clues sellers in on the seriousness of the buyers, but also serves as evidence that the buyers can afford the purchase. If a prospective buyer can't come up with $1,000 for a deposit, they may be wise to take a closer look at their finances to make sure a home purchase is in their best interest.
2. Financing Contingency: The financing deadline is the date by which a buyer must have proof of a full commitment from their lender stating they will be lent the amount needed to purchase the home. This decision depends on the underwriters at the bank and differs from a pre-approval which is more of a theoretical qualification. If the buyer's financing is not proven by the date in the contract, either party may exit the deal without penalty if an extension is not a satisfactory solution.
3. Dates: Contract and addendum dates need to be adhered to in order to ensure the validity of the contract. Pay close attention to the closing date, financing date, inspectino date and any other dates outlined in subsequent addendums. If a date falls through the cracks, an addendum to the contract will be needed to extend that date, or the contract may not be airtight. Your agent will be on top of all dates and keep you aware of what is coming up throughout the transaction.
Sellers Property Information Report
Commonly referred to as a SPIR, this document fulfills the sellers obligation to disclose any information which may effect the value of the property. This document gives prospective buyers a thorough history of the property and clues them in on any possible repairs or issues they could face in the future. If you are a seller, it's crucial that you fill the SPIR out with as much detail as possible to protect yourself from any future liability due to lack of disclosure. If you're a buyer, be sure to read through the SPIR closely with your agent and ask lots of questions. It's better for both parties to know all of the details up front than to face a problem in the future.
Bylaws & Association Documents
If you are buying a condo or a home in a development with an association, you will be presented with a large amount of documents outlining everything from rules and regulations to dues and budgets. The association may dictate your property maintenance, ability to have pets and parking regulations just to name a few. in an association, although you own the home, your usage of it and the associated property may be dictated in their individual regulations. Pay special attention to the budgets and financial statements provided as well--if you see that the association is in trouble, beware! That could mean if a major repair is needed the association will collect extra dues (on top of monthly or annual fees) from members to cover the expenses. If you are unwilling or unable to pay, the association may be able to impose fines or liens against your property. There will be a lot of documents to cover, but it's important to take the time to read them all over carefully and be sure you will be able to comply with all of them long term.
Your agent will be well versed in all of these, and every other document presented throughout your transaction. It is always advised that you seek the counsel of an attorney who specializes in real estate to go through every item ensuring compliance. Remember to ask questions about anything that concerns you; your agent and attorney are there to help!