The Purchase Contract: Submitting a Real Estate Offer to Buy Property
What is a Purchase Contract?
The purchase contract is a legal document that is created and filled out by the buyer who wants to make an offer to a seller about buying some real estate property.
Real estate agents have standard purchase contract forms they are given to use with clients, and these forms have been created by state attorneys in whatever state the realtor is licensed in.
For example, a purchase contract in California will be much different than a purchase contract in Ohio.
Filling Out a Purchase Contract
When it’s time to submit an offer on a property, your realtor will need to know several key pieces of information to successfully fill out your purchase contract for you.
These can include:
- Property Address
- Legal Description
- Who is paying for title insurance
- Who is paying for escrow fees
- Who is paying for a home warranty
- Will you have a home inspection
- What items stay with the property
- What type of financing
- How many days to allow for obtaining financing
- How many days to allow for obtaining insurance
If you’re a buyer with limited cash, you can get creative with the above questions and answers.
For example, you could check box that the seller is to pay for title insurance, escrow fees, home warranty, etc.
If you think the seller will not agree to pay for those things, you could pay for some of them by offering a few extra thousand to the purchase price in exchange for the seller paying closing costs.
This extra money added to the purchase price doesn’t come out of your pocket today as cash, but instead gets added on to your loan amount.
It works out to very little extra money per month over 30 years if you compare mortgage payments before and after bumping the price a few thousand dollars.
In some real estate markets, the buyers have the upper hand and the seller’s will actually offer buyer incentives such as pre-paid closing costs or $2,500 selling bonus, or other incentives towards closing fees.
The best thing to do is to consult your realtor about strategy for filling out the purchase contract and what costs you should ask the seller to pay for, split equally, or you pay for.
You can get creative with your offer so that you have to come out of pocket with very little cash on a real estate deal and can use the seller as well as the bank to finance most of the purchase.
Submit the Offer
Once the purchase contract is filled out, you’ll be responsible for signing the line that says buyer signature as well as any other places on the contract asking for buyer signature or buyer initials.
Most real estate agents will use an online signing system like DocuSign, for example, and it will highlight each place you need to sign and quickly take you to each signature location.
Once you’ve signed, the document gets forwarded to the seller’s realtor and then that agent reviews your offer and relays the information to the seller to let them decide to accept or counter or reject your offer.
If the seller accepts, they’ll sign the purchase contract and send it back to you so that you each have a copy of an official contract with both parties signatures.
On the purchase contract, a date of closing will have been filled out as well as what escrow company the closing will take place at.
Honor the Purchase Contract or Face Possible Penalty
The contract is now in place and if either party breaks the contract without just cause, damages could be awarded which in most cases is the earnest money deposit a buyer submits with their purchase contract.
But things can also get more serious, so prior to submitting a purchase contract to a seller, make sure you are aware as the buyer about different clauses in the contract that you could use to legally get out of the contract if the real estate not meet your expectations.
For example, the inspection clause could allow for a buyer to back out of a deal if the property is discovered to have serious issues the buyer didn’t know about originally until an inspection was done.
And if the seller won’t pay for the repairs the buyer requests after having an inspection done, then in most contracts there is a section allowing the buyer to back out of the contract.
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