Real Estate Purchase Contracts - Know What You're Doing

Home Property

A real estate purchase contract requires that certain information be included. Whether buying or selling you must comply with the words on that contract. Not to do so can throw you into a tangle of legal problems.

Investors (and inexperienced real estate agents) are often careless in preparing purchase contracts. Perhaps the reason for that is that they don't really understand the importance and purpose of the information that should be included in the contract?

The escrow officer handling your deal needs detailed information to allow the transaction to close successfully, properly and on time. Let's look at what a basic contract requires and why it requires certain information:

Buyer's Name: This is the name that will go on title, be sure all are included, check spelling and enter with care.

Earnest Money: The deposit check should be attached to the contract when it is delivered to the escrow company's or attorney's's office. Is the deposit required to be in the form of cash, personal check, certified check?

Premises Address and Legal Description: Even though this will be checked in escrow, enter it carefully so there will be no confusion about which piece of property is being purchased.

Closing Date: This can be very important to both buyer and seller. The buyer probably has a mortgage loan commitment from a lender that may have an expiration date. Be sure all have agreed to the date of closing and that all understand that the deal is not closed until the deed is recorded.

Occupancy: Is it a primary residence, secondary residence, does buyer not intended to occupy? Improperly completing this information may generate an incorrect title insurance policy and may cause a delay in underwriting approval by the lender.

Financing, Appraisal, Discount Points, Title Policy: This information is required for the Settlement Statement. Ask the escrow officer exactly which of these items you are expected to provide.

Marital Status: Is the buyer married or single. This can affect how the property is titled.

Homeowner's Association: Escrow needs name of the HOA and name and phone number of contact person.

Additional Terms and Conditions: State them clearly. Ambiguity may result in a delayed or cancelled escrow.

Addenda: All addendums should be attached when the contract is delivered to escrow.

Counter Offers: Deliver with the contract all counter offers, organized chronologically.

Buyer's current address and phone number: Escrow will need to communicate with the buyer.

Seller name, address and phone number: Needed so escrow officer can send IRS required information and to schedule document signing.

Of course, real estate contracts vary in form and required information, but listed here are important basics. If they are not provided to the person handling escrow the closing could be delayed. Take the time to complete the contract correctly the first time and save everyone from developing more gray hair.