As a rental property investor in Lenox, you are aware that buying a property is crucial to growing your portfolio. It is critical to thoroughly understand the real estate purchase contract in order to make an informed purchase. A standard real estate purchase contract is a document that outlines the terms and conditions of the sale between the buyer and seller. The most important sections of a real estate purchase contract that every investor should be aware of will be covered in this blog post!
Earnest Money Deposit
Generally speaking, the earnest money deposit is anywhere from 1% of the purchase price to 3% or 4% of the purchase price. It’s an amount you put in escrow when you submit your offer that shows the seller that you are sincere about buying the property. The earnest money deposit will be applied to the purchase price at closing.
Offer to Purchase
The Offer to Purchase section starts with a detailed description of the property. This description must be inspected thoroughly to guarantee it contains the correct property details you are bidding for.
In addition, it will likely include a list of items included with the sale and items to be excluded from the sale. Since the seller has the ability to omit almost anything from the sale, it is equally important to pay careful attention to these lists.
Purchase Price
The purchase price section of the real estate purchase contract is one of the most critical parts. In this section, you will agree to pay the amount specified in the agreement to acquire property ownership.
It is also crucial to keep track of additional fees or costs related to the transaction, such as the seller paying for closing costs. This part will also include how you plan to pay for the property, whether through financing or not, and the amount of cash you expect to bring at settlement.
Seller Disclosures
The seller disclosures section addresses any known issues with the property, whether physical or legal. This covers any outstanding lawsuits concerning the property, environmental concerns, or the requirement for a new roof.
Usually, you ought to take this information into account when making an offer. If the seller fails to disclose any known issues and you discover them after your closing, the seller could be liable for damages.
Contingencies
Another vital section of a real estate purchase contract is the contingency section. This explains all the conditions that must be met before closing, including having a clear title, securing financing, and scheduling an inspection.
If the buyer does nothing, these contingencies are usually automatically waived. To understand what to anticipate throughout the process and how much time you have to fulfill the requirements, you need to review these contingencies.
Inspection Period
The inspection period is the duration after you submit the offer, during which you can cancel the purchase contract on numerous grounds. For instance, you may find a significant defect with the property and opt not to purchase it, or you may have buyer’s remorse.
If, within the inspection period, you discover something that was missed during your initial inspection, you can cancel the contract without facing any repercussions.
Assessments and Financial Obligations
This section describes any current or future assessments and their financial obligations. If a major project is proposed for the area where the property is located, this section will outline the project and any associated costs.
It might also cover any outstanding fees that you will have to pay at closing, like property taxes, HOA fees, special assessments, or utility bills. It’s critical that you thoroughly read this material in order to comprehend any financial obligations that may arise from the transaction.
Closing and Settlement
The time and location of the sale settlement are specified in this section of the real estate purchase contract. Typically, this includes an anticipated date for property transfer. It’s not always the case, despite the misconception held by several buyers that they can take possession of a property at closing. Consequently, it’s vital to review the closing section of your contract cautiously so that you can prevent any unforeseen timing issues.
Offer and Time for Acceptance
One of the final sections of a real estate contract will usually contain imperative dates that you should pay special attention to, such as the offer’s expiration date and time and contract deadlines. A purchase agreement for real estate is only enforceable if the seller accepts your offer. The offer and time for acceptance part specifies the terms of the offer, including the time frame within which you must submit it, the seller’s acceptance period, and when the buyer’s responsibility for providing a deposit begins. This section may also incorporate when the contingencies start and the duration of your obligation to adhere to these terms.
Acceptance/Counteroffer/Rejection
Once you have reviewed the real estate purchase contract and are prepared to make your offer, you must indicate acceptance or rejection by signing the bottom. If the seller accepts your offer, the purchase agreement becomes legally binding, and you should complete the transaction in accordance with the terms outlined in the contract.
This clause will be part of your purchase agreement, however, if the seller decides to make a counteroffer, or make an offer in response to your initial offer. The seller may propose a revised purchase price or provide different parameters in their counteroffer. If you accept the counteroffer, you must sign and return it to indicate acceptance.
It can be quite helpful to have a rental market expert walk you through some of the trickier parts of buying an investment property. Real Property Management Shire Team can assist you in every step of the process, from the initial purchase to ongoing Lenox property management. Contact us online or call 413-418-9600 to learn more about what we offer our investors.
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