Whether you are buying or selling property, your real estate purchase agreement is often what makes or breaks the deal. To side-step all the booby traps and gain an unfair advantage, let's sift through the fine print together:
Earnest Money: How Much and Who Gets to Keep It?
Also labeled as a good faith deposit, earnest money is literally a check that is offered upfront by the buyer to show how sincere he or she is. And here's the favorite question, "How much is this sincerity going to cost me?" Earnest money can dip as low as a symbolic $1 or climb up to 5% of the purchase price. As a crude rule of thumb, 1 to 2% of the purchase price seems to be the healthy norm for most markets.
If all goes well, this earnest money is often bundled as part of the down payment. Now that's not a problem. The real headache erupts when things go wrong... and suddenly everyone wants to keep the earnest money. Since there are often no fast-and-hard rules on this, your real estate purchase contract plays a critical role in sorting out this mess. Your real estate purchase agreement form should have an "earnest money" clause that clearly defines when the seller can swallow the money and when he or she has to cough it out.
Property Inspection: How Much Time and Who's Paying?
Just like you should always test-drive a car before buying, your real estate motto should be "no inspection, no deal". Your real estate purchase contract should give a reasonable deadline for the initial inspection, plus a time extension if the seller is required to make any repairs.
At the same time, your real estate purchase form should also contain complete answers to both questions: "What type of damages is the seller responsible for?" and "If something is broken, missing or leaking... does the seller have to repair it personally or just give the buyer a discount off the purchase price?"
Closing Costs: Now's a Good Time for You to Bargain!
While certain closing costs are "expected" to be covered by one party (such as the buyer paying for inspection or seller footing the title costs), nothing is ever set in stone... until you sign that dotted line. Of course if you are already snagging the deal of the century, then it's probably better not to haggle over the closing costs... otherwise there's always room for bargaining here.
Your real estate purchase contract should make it crystal clear who's paying for which closing costs. To help you fill in the blanks, here's a hair-raising list of closing costs: appraisal fees, property inspection fees, title costs, recording fees, mortgage fees, insurance costs, credit reports, tax service fees, pro-rated property taxes and mortgage interests.
Tackling a real estate purchase agreement is no child's play, but it certainly can be done... as long as you take the time to read and digest every line of it. Stick to a plain English agreement form and always ask, ask, ask if you have any doubts at all. It does take a bit more effort, but this bit more will go a long way to guarantee you a flawless transaction.
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