The heart of any real estate transaction is the contract. It is the meat and potatoes. Everything that the realtors, lenders and title company need to know to close a deal is in the contract and any amendments or addendums that follow.
Therefore, it is important to have everything that the parties desire within the transaction clearly outlined in the contract . This might include a seller credit or home warranty, Or if certain appliances are to stay or go with the seller. All these things must be included in the contract to set a standard of expectation. It also prevents incidences of: “Well that was my washer and dryer” and the seller running off with appliances the buyer is expecting. Or even worse: “That other lot was supposed to be included.” If it wasn’t on the contract, it won’t get conveyed.
Here are some helpful tips to make sure there are little to no issues when writing your real estate contract:
Identify the Real Estate
Know what you are selling. Even if all you have is an aerial from Google Maps with a hand drawn outline of what is intended to be sold and an address. Send that to your title company and ask for a preliminary report. In their search process, they will the correct legal description to include on your contract, preventing issues later with lots or tracts being omitted or included by mistake.
Identify the Parties
A preliminary report will include how the real estate is currently vested. So, if John and Jane Smith want to sell their house, the preliminary report will note that the property is actually owned by John A. Smith and Janice Smith (their legal names) or Jane Smith’s Trust.
The Buyer in the transaction will direct how they want to take title to the real estate on the contract. The buyer might prefer to take title with first, middle and last names or just first and last. Or they may request to take title via a trust or a company. This should all be included on the initial contract or a follow up Addendum.
Set a Purchase Price and Terms
Agree on a purchase price. Once the purchase price is decided, set the terms. Who will pay closing costs to the title company, title insurance and any? Will there be a Home Warranty and who will pay that and how much? Is the Seller willing to offer a seller credit to help with the buyers closing costs? What stays and what doesn’t stay with the property? Never assume that appliances stay, even if it seems logical.
Pick a date to close
Closing dates can be very flexible and easily changed with addendums so long as all parties agree to it. Often contracts will state “on or before” and that just means that at any time before the stated close date in the contract the transaction can be closed if all parties agree. In the current market, unless it is a cash deal, give yourself, your client, and lender time and set closing out 30 to 45 days. Best practice is to avoid closing on the very first or last day of the month as these are the busiest days for closings, and it may be difficult to get the time you want unless you schedule early.
If something doesn’t seem right to you, ask questions! For Buyers purchasing or sellers selling a home this is a huge change and can be very tense. We understand the stress of each transaction and are here to help and answer any questions. Even if they seem trivial, we are happy to assist and walk you through the process, it’s our job!