If you are one of the millions of Americans that plan to sell their home this year, it is important to know how the process actually works.
Selling a home involves what is, for most people, the largest transfer of assets they will ever participate in.
That is why it is important that you have a proper house sale contract in place that keeps you legally protected and ensures that you receive the right amount of money from the sale.
Like any major deal or transaction, the contract is everything. With that in mind, here is everything you need to know about a real estate purchase agreement.
1. Essential Information in a House Sale Contract
A real estate purchase agreement is a legal contract that ensures both parties are satisfied by the terms of a sale and have clearly identified rights and responsibilities.
As with any binding document, there are some essential bits of information and clauses that any real estate contract should have. These are:
- A description of the property and its listing price
- Full identification of all parties (buyer, seller, and real estate agents)
- The condition of the property
- The terms of payment
- The financing sources that will cover the listing price (i.e. the mortgage)
- Any escape clauses (i.e. if the property condition later turns out to be worse than originally stated)
- The signatures of all parties
It is worth noting that there are some situations where a home sale is much more straightforward and all of this information might not be needed.
For example, you can swiftly sell my house as is to a cash offer company that will ask for minimal paperwork.
2. Key Contingencies
A crucial part of any house sale contract is the contingencies section. This lists the various factors that still need to be met before the sale can be concluded.
Chief among these is financing. The buyer must lay out in detail how they are going to pay for the house.
If they are paying cash, they should be able to demonstrate with bank statements that they can afford to do so.
If they are using a mortgage, they should be able to provide clear and verifiable information on their mortgage provider and the deal they are seeking.
In addition, the contingencies should specify the conditions of the property to ensure that a buyer is not sold a sub-par property. These ensure that all parties act in good faith.
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3. Costs Paid by the Buyer
Finally, the house sale contract should lay out all of the costs to be incurred by the home buyer. The contract should specify the price of the so-called “earnest money deposit“.
This is an amount paid prior to the sale to show that the buyer is serious, and will usually amount to 2-3% of the list price.
Then there is the actual deposit, which will usually be around 6-10% of the list price. In addition, any commissions paid to real estate agents should also be spelled out in the contract.
Your Real Estate Questions, Answered
Understanding the ins and outs of a house sale contract will help you make the right real estate decisions in 2021.
For more essential guidance on the real estate questions that matter, make sure to consult our expertly-curated Home Improvement section for up-to-date advice and guidance.