When writing a purchase contract for buying a house, it is not necessary to begin with a blank piece of paper. Individual states typically have standard purchase contracts that are used by real estate professionals. Those contracts may be designed by attorneys and Realtors. You can often obtain a blank copy of a contract from a title or escrow company. Even with a prepared contract, there are important points that must be addressed.
Read the purchase contract. If you begin with a blank standard contract, read it completely before proceeding. If there are terms you want to exclude from the contract, they will need to be crossed out and initialed by all parties.
Identify the person or persons purchasing the property, and the parties selling the property.
Properly identify the property in the contract. Include the physical address, along with the track, lot and block numbers. Identify what the purchase includes.
Clearly state the purchase price that will be paid for the property.
Identify and address the earnest deposit (if there is one). The amount of the earnest deposit should be stated, along with who will be holding the funds during the transaction, and if it will be applied to the purchase price. Clarify if the earnest deposit is refundable, or non-refundable after certain contingencies are made.
Do the correct math. When noting the purchase price and earnest deposit on the contract, there should also be mention of how the payment will be made. Note what percentage will be paid by a loan, what percentage will be paid by cash, and what amount of the earnest deposit will be applied to the purchase. Those amounts should correctly reflect the purchase price on the contract.
State a close of escrow date and clarify what will happen if the property fails to close by that date.
Clarify if the purchase is contingent on obtaining a loan. This would include any contingencies regarding appraisal amounts.
Disclose pertinent financing information, such as contingencies, loan approvals, type of financing, and loan costs and who pays them.
Note the title or escrow company that will be used, but do not specify an escrow officer. Specify the type of title insurance that will be purchased, and which party will pay for the policy.
Specify what fees, such as escrow fees, will be paid by the buyer or seller.
Identify the inspection period. Clarify how long the buyer can inspect the property, and at what point can the buyer cancel the contract without loosing the earnest deposit.
Identify the warranty items on the property. Clarify if the house is being sold "as is" or if the appliances, heating, air, and so forth are warranty items. Usually this means they will be in working order at the close of escrow. It does not necessarily mean the items are under any warranty after escrow closes. Yet, home warranty insurance can be purchased separately to extend warranty periods.
Identify who will pay for any transfer fees on the property.
Write in any unaddressed terms in the appropriate space. If you are using a standard contract, yet have stipulations that are not addressed in the contract, look for the area of the contract (if there is one) that allows additional text to be written in. If the write-in information contradicts other areas of the contract, be sure to clarify your intent.
- A. Johnson