The real estate purchase contract is a legally binding contract used to buy a property. It states the conditions and terms of the sale. It takes both the buyer and seller through a step-by-step legal process to close promptly. It will contain basic info about the property, like the physical description, the sales price, and the closing date. It can also include details like contingencies or addendums.
Yes, you can write the contract. Contracts should be state-specific and have enough fundamental rights and responsibilities written into them to keep both parties involved legally safe.
Always buy and sell real estate using an entity.
LLC and trusts are the first choice-favorites. C corps and LLP are good, but the LLCs and trusts have more maneuverability and are easier to assign and transfer with the property. Plus, they have the best tax advantages.
We suggest customizing the contract to add a few paragraphs to meet your needs and any unique property conditions. You should use a contract to buy and a different contract to sell. Real estate purchase contracts are not one size fits all.
When you are purchasing a property, your earnest money deposit should be as low as possible but enough to be respectable. You can put down $10, but $500 is much better. And you should have it worded so that if you do not buy the property
you get your money back, or the seller gets to keep the earnest money, and there is no recourse back on you.
However, if you are selling the property, you will want to use different wording.
You will want a large amount of earnest money, 1-3% of the asking price, and non-refundable. It gives the buyer incentive to find funding and close. But, if you make the earnest money too low, it is easy for a buyer to walk away from the contract. So, keep it tight.
The real estate purchase contract is not valid until earnest money exchanges hands.
As soon as the contract is signed, take it and the earnest money straight to the title company, escrow company, or closing attorney. They need to begin a title search immediately. In case they discover any issues, there will be enough time to resolve them and not delay the closing.
Make sure you choose the escrow company, title company, or real estate attorney that your state recognizes as a legal agent. You will want them to be investor-friendly with an understanding of simultaneous closings, trusts, and 1031 exchanges for investors.
Sellers do not want to see numerous contingencies - it makes them nervous. The three main ones to overcome are inspection, appraisal, and financial.
If you are buying and paying with CASH, you don't need a financing contingency in your real estate purchase contract. If you pay with hard money or angel financing, then the funding is based on 70% of ARV (after repaired value) and will cover the sales price's cost.
A financing contingency is written into a contract when an investor sells to a retail buyer or homeowner. The contract then becomes contingent upon the buyer obtaining financing.
If you are selling and the buyer wants to pay with financing, ensure that they provide you with a prequalified approval from their lender before accepting the real estate purchase contract. It means that they have already submitted their paperwork and the lender approved them for a loan amount.
Inspection contingencies can be a little trickier. If you are buying, do a physical inspection of the property. If you are unable (in a different city or state) or are inexperienced and don't know what to look for, hire a professional. Home inspections start around $250, and they offer a lot of insight and peace of mind. Plus, it can get written off on the taxes.
If you are selling, always give an appliance/ home warranty. It covers the appliances, water heater, ac/ heater, and garage door opener. The cost is small + we write this expense off also. It builds trust and value. It provides an extra layer of protection if an appliance fails after closing. Plus, we always advertise it when listing our properties, it gives a slight advantage over the competition. Heads up when selling a property, almost every state will require a termite inspection and a septic tank inspection.
As for the appraisal contingencies for a real estate purchase contract, if you are selling, make sure the property is repaired and cleaned. To give the best impression and create value, stage the house. If you have done your research correctly, your comps will be the same as the appraisal.
Sometimes an addendum will be added to the contract. It usually occurs due to an inspection or when a change needs to take place. For example- If an inspection brings back findings that the septic tank is at capacity and needs emptying, an addendum would get added to the contract and the issue resolved before closing. Or if there are special fees associated with the property like homeowner association fees or condo maintenance fees.
If mandated by local, state, or federal law such as radon gas, asbestos, lead-based paint, mold, or Megan's law. It is vital to use real estate purchase contracts that are specific for each state.
Who prepares purchase and sale agreement?
Anyone can provided the state specific contract is used.
Or consider using a Realtor to eliminate contract misunderstandings and add another layer of legal protection because they carry Errors and Omission Insurance (E&O). Realtors are the professionals that will get the property sold, paperwork organized and act as a buffer between you and the buyer. Plus, they don't get paid till the property closes. They are definitely worth their 2-3% commission.