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March 18, 2013

Buying or Selling a Home

The Purchase Contract

What are the key provisions of the purchase contract?

A purchase contract, in most cases, is a standard form contract with any necessary riders attached. The contract can include many provisions but should include the following items:

  • the date of the contract;

  • the purchase price of the home;

  • amount of the down payment;
  • all items to be included in the sale such as wall-to-wall carpeting, window treatments, appliances, or lighting fixtures;
  • any items to be excluded from the sale such as an heirloom chandelier;

  • the date when the deed will be transferred (or the closing date);
  • a mortgage contingency clause if the buyer intends to apply for a loan. This states that the buyer intends to obtain a loan in a specified amount at a specified interest rate within a specified period of time. If the buyer is unable to obtain financing, the buyer may be released from his obligation. The seller usually allows the buyer 30 to 60 days to obtain a loan commitment.
  • an inspection rider. This allows the buyer to have the home inspected, usually within 10 days of the date of the contract. If the inspection is unsatisfactory, the buyer ordinarily is released from the contract. However, the buyer may not be released if the contract allows the seller to make repairs and the repairs, when made, meet applicable standards of workmanship.
  • an attorney-approval rider for both the buyer and the seller if either or both parties are signing the contract before it is reviewed by their respective attorneys;
  • a legal description of the property;
  • provision that the seller will provide good title to the home or what is sometimes called marketable title. Generally, the seller fulfills this obligation by providing an abstract of title, certificate of title, or a title insurance policy. This indicates that the seller has the authority to sell the home. In some states, for example Connecticut, the seller is required to deliver good title which the buyer is expected to verify, at his or her own expense, by securing an abstract of title, certificate of title, or a title insurance policy. If the buyer encounters problems in establishing title, he or she can reject the title at closing.
  • any restriction or limitations that could affect title;
  • provision for paying utility bills, property taxes, and similar expenses through the closing date;
  • provision for return of the buyer's earnest money deposit if the sale is not completed as, for example, when the buyer has been unable to obtain financing after reasonable or good faith efforts to do so;
  • provision for taking possession. Along with a firm date for transferring possession from the seller to the buyer, the buyer should include a provision that requires the seller to pay a specific amount of rent per day if the seller does not leave the home by the agreed date. If the buyer and seller already know that possession will be delayed, the buyer may ask for a certain amount of money to be held in escrow at the closing to cover the rent for the expected time period.
  • provision for a walk-through inspection within a specified period before the date of closing to allow the buyer to make sure conditions are as they should be according to the contract;
  • terms of any escrow agreement;
  • provision for who is responsible for maintaining insurance until the closing. The Uniform Vendor-Purchaser Risk of Loss Act applies in some states, which means that the seller assumes the risk of loss until either the transfer of title or possession. In some states, the common law requires the seller to assume this risk.
  • signatures of the parties.

>>What is an offer to purchase?
>>What might I include in my offer to purchase a home?
>>What is earnest money?
>>How is the offer negotiated?
>>How does an offer relate to the purchase contract?
>>Can oral promises constitute a contract?
>>When should we involve a lawyer?
>>What are the key provisions of the purchase contract?
>>What is an inspection rider?
>>What is an attorney-approval rider?
>>What is a mortgage-contingency rider?
>>May the seller refuse a mortgage-contingency rider or an inspection-contingency rider?
>>What happens to my earnest money deposit if we do not complete the sale?
>>Can a buyer sue a seller for backing out of the contract?
>>Are there any special considerations when you are buying a home from a builder?

Practical Law Home | Buying or Selling a Home | Basics of Buying a Home
Basics of Selling a Home | Why Real Estate Is Covered By Special Laws | Real Estate Brokers
*The Purchase Contract* | Financing a Home Purchase | The Closing | The Fair Housing Act
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