As a Waterbury rental property investor, you understand that purchasing properties is crucial for expanding your portfolio. Understanding the real estate purchase contract thoroughly is essential to buy with confidence. A standard real estate purchase contract specifies the terms and conditions agreed upon by the buyer and seller. In this blog post, we’ll highlight the critical sections of a real estate purchase contract that every investor should know!
Earnest Money Deposit
Earnest money deposits are generally from 1% to 3% or 4% of the purchase price. You put this amount in escrow with your offer to demonstrate to the seller that you are serious about buying the property. The deposit will be applied to the purchase price at the time of closing.
Offer to Purchase
A detailed property description starts the Offer to Purchase section. It’s important to examine this description carefully to ensure it lists the correct property details you are bidding for.
It is also likely to have a list of items that are included and excluded from the sale. Paying attention to these lists is crucial, as the seller can exclude nearly anything from the sale.
Purchase Price
One of the most critical parts of the real estate purchase contract is the purchase price section. This section outlines the amount you agree to pay to obtain ownership of the property.
Also, it’s important to note any extra fees or costs connected to the sale, such as the seller covering closing costs. This section also covers your payment plan for the property, including whether you’ll use financing or cash, and the cash amount you’ll bring to settlement.
Seller Disclosures
Any known issues, physical or legal, are covered in the seller disclosures section. This covers any pending lawsuits, environmental concerns, or the necessity for a new roof.
Usually, you should consider this information when making an offer. Should the seller fail to disclose known issues, and you find them after closing, the seller could be responsible for damages.
Contingencies
Another key section of a real estate purchase contract is the contingency section. This section lists all the conditions that must be met before closing, such as getting financing, completing an inspection, and securing a clear title.
These contingencies are generally waived automatically if the buyer fails to act. Reviewing these contingencies is essential to understand what to expect and how much time you have to meet the requirements.
Inspection Period
The inspection period, following your offer submission, is when you can cancel the purchase contract for several reasons. For instance, you might find a major defect in the property and choose not to buy it, or you might experience buyer’s remorse.
During the inspection period, you are allowed to cancel the contract without penalty if you catch something not initially inspected.
Assessments and Financial Obligations
This section lists any current or future assessments along with their financial obligations. If a major project is proposed in the property’s area, this section will outline the project and any related costs.
It may also list any pending fees you will need to cover at closing, including property taxes, HOA fees, special assessments, or utility bills. It’s essential to carefully review this information to grasp any financial obligations you may face due to the purchase.
Closing and Settlement
This part of the real estate purchase contract outlines the date and location for finalizing the sale. This usually lists an anticipated date for the transfer of property. Buyers often assume they can take possession at closing, but this isn’t always the case. Thus, it’s important to thoroughly review the closing section of your contract to prevent unforeseen timing issues.
Offer and Time for Acceptance
The final sections of a real estate contract often contain key dates to watch, including the offer’s expiration and contract deadlines. A real estate purchase contract is valid only upon the seller’s acceptance of your offer. The offer and time for acceptance section specifies the duration for submitting your offer, the time the seller has to accept it, and when the buyer needs to provide a deposit. Furthermore, this section might include when contingencies start and how long you have to meet them.
Acceptance/Counteroffer/Rejection
After going over the real estate purchase contract and being ready to submit your offer, you must sign the bottom to indicate acceptance or rejection. If the seller accepts your offer, the purchase agreement becomes binding, and you must proceed with the transaction as per the contract terms.
If the seller decides to counteroffer, responding to your initial offer, this paragraph will be included in your purchase agreement. The seller’s counteroffer may have different terms or propose a revised purchase price. If you accept the counteroffer, you have to sign and return it to confirm acceptance.
A rental market expert can be invaluable for guiding you through the complex aspects of purchasing an investment property. Real Property Management Seaside can assist at every step, from the initial purchase to ongoing property management in Waterbury. Reach out to us online or call 941-225-2533 to learn more about our offerings for investors.
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