If you’re a Jefferson rental property investor, you understand that purchasing a property is a large part of developing your portfolio. To be able to buy confidently, it’s significant to thoroughly understand the real estate purchase contract. A standard real estate purchase contract is a document that sets out the terms and conditions of the sale between the buyer and seller. This blog post will tackle the most essential sections of a real estate purchase contract that every investor needs to know!
Earnest Money Deposit
The earnest money deposit is generally anywhere from 1 percent of the purchase price to 3 or 4 percent of the purchase price. It’s an amount you put in escrow when you submit your offer that displays and shows to the seller that you are serious 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 commences with a detailed description of the property. This description should be reviewed heedfully to ensure that it contains the correct property details for which you are bidding. This description will similarly possibly cover a list of items included with the sale and items to be excluded from the sale. It’s equally important to pay close attention to these lists, as the seller can exclude just about anything from the sale.
The purchase price section of the real estate purchase contract is one of the most important sections. In this section, you will agree to pay the amount stated in the agreement to acquire property ownership. Moreover, it’s necessary to note any additional fees or costs related to the sale, namely the seller paying for closing costs. This section will additionally clarify how you plan to pay for the property, whether through financing or not, and the amount of cash you anticipate bringing at settlement.
The seller disclosures section includes any known issues with the property, whether physical or legal. This encompasses things like, in particular, any outstanding lawsuits involving the property, environmental concerns, or the need for a new roof. Usually, you should think about this information when you’re making an offer. If the seller fails to disclose any known issues and you see them after your closing, the seller could be liable for damages.
Another essential section of a real estate purchase contract is the contingency section. This refers to all the conditions that must be met before closing, particularly obtaining financing, obtaining an inspection, and having a clear title. These contingencies are mostly automatically waived if the buyer fails to act on them. Nevertheless, it’s relevant to check these contingencies still so that you know exactly what to expect in the process and how long you have to meet those requirements.
The inspection period is a period of time after you submit the offer that enables you to cancel the purchase contract for any number of explanations. For instance, you may find out a serious defect with the property and decide not to obtain it. Or, you may have buyer’s remorse. The inspection period gets you to cancel the contract without consequences if you catch something that wasn’t in your initial inspection.
Assessments and Financial Obligations
This section is about any current or future assessments and the financial obligations associated with them. If a huge, major project has been proposed for an area where the property is located, this section will outline the proposed project and any associated costs. It may consist of any outstanding fees you will be responsible for at closing, such as property taxes, HOA fees, special assessments, or utility bills. It’s significant to assess this information meticulously to ascertain any financial obligations you may be taking on as a result of the purchase.
Closing and Settlement
This section of the real estate purchase contract notes when and where you will settle on the sale. This most commonly covers an anticipated date for property transfer. Although countless buyers anticipate they can take possession of a property at closing, that isn’t always the case. This is exactly why it’s essential to go over the closing section of your contract thoroughly so that you can prevent any unforeseen timing matters and issues.
Offer and Time for Acceptance
One of the last sections of a real estate contract will mostly include major dates you should watch closely, along with the offer’s expiration date and time and contract deadlines. A real estate purchase contract is only valid if the seller accepts your offer. The offer and time for acceptance section drafts how long you have to make your offer, how long the seller has to accept it, and when the buyer’s responsibility for endowing a deposit kicks off. Moreover, this section may include when the contingencies commence and how long you have to meet these terms.
Once you have checked the real estate purchase contract and are ready to submit your offer, you must specify acceptance or rejection by signing the bottom of the contract. If the seller accepts your offer, the purchase agreement becomes legally binding, and you must continue with the transaction according to the terms set out in the contract.
But, on the other hand, if the seller considers making a counteroffer, which is their response to your initial offer, then this paragraph will be covered in your purchase agreement. The seller’s counteroffer may consist of different terms or suggest a revised purchase price. If you accept the counteroffer, then you must sign and return it to imply your acceptance. However, if you do not want to go ahead with the transaction as stated in the seller’s counteroffer, then it is determined as a rejection of the contract. You should continually see to it to heedfully review the terms of your agreement just before signing, as this will secure that you completely know and apprehend what you are agreeing to and avoid any misunderstandings.
Now that you’ve learned about some of the important sections of a real estate purchase contract, you’ll be armed with the understanding to buy rental property confidently and surely! Certainly, having a rental market expert on hand to lead you through some of the more complex elements of getting an investment property can be substantially helpful. Real Property Management Stellar can aid you every step of the way, from the initial purchase to ongoing Jefferson property management. To learn more about our services and what we offer our investors, contact us online today.
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