Agreements: Contract of Purchase
Congrats, you've made a stellar offer, handled the negotiations smoothly
and professionally, and the seller wants to sell! Now it's time to put an
agreement together, sealing the deal.
You will want to establish a written agreement between you and the seller
stating that you acknowledge the offer under the terms and
conditions negotiated. Typically, a purchase agreement is created.
Purchase Agreement
The purchase agreement (also known as "Binder Agreement", "Contract of
Purchase", or "Sales Agreement") is a contract stating the terms of a purchase.
The contract states that you agree to buy and the seller agrees to sell,
under certain specific terms and conditions detailed in writing and signed
by both you and the seller.
You may have submitted a purchase agreement as the basis of your
offer, but if you didn't,
now is the time to put one together. You may want to consult with your attorney and obtain a template
purchase agreement for your state.
Your purchase agreement may contain such items as
escrow, title and vesting, possession and keys, fixtures, and personal property, as well as
many other important sections for you and the buyer to agree upon. You will want
to specifically outline clearly and concisely any contingencies you may have.
Basically, a contingency states that both you and the seller can terminate the agreement,
free of obligations, if one of the conditions in the agreement fails to occur. As a buyer
there are a few contingencies that you most likely will want to include in your agreement. Here
are the most common:
- securing the mortgage - you don't want to be stuck buying the property if your financing
fails to go through
- property inspection - required by law in many states, nonetheless you will want to do an inspection
to avoid purchasing a Money Pit
- sale of your property - you are trying to sell property and need the proceeds to use for
a down payment on the one your purchasing
- time periods, satisfaction/removal of contingencies, disapproval cancellation rights -
establish time frames for the different conditions to be met, as well as cancellation privileges
in case something were to go wrong
It is important that the agreement (as well as all offers and counteroffers) is signed by
all parties involved. If both you and your spouse are buying and will be on the title, then you both must sign
the agreements for them to be valid. If the transfer is to occur with more than
one seller, then both sellers must sign as well.
Prior to signing and executing the agreement,
make sure there are no blank lines on the agreement. If there are blank lines, draw lines through them or
put N/A on them. Just make sure there are no blank lines. Signing a contract with blank lines
is like handing someone a blank check with your signature on it!
If an escrow account
hasn't been established, you will want to do so now. The escrow officer will use the agreement as
a basis for creating the instructions necessary for closing on the property. You'll want this
put in place prior to finalizing the mortgage, inspections, and insurance.
Ok, let's protect your investment -->
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