Residential Sales Contract – Items to Know

So you finally found a property and are ready to officially make an offer.  Your real estate agent writes up the offer and sends over the sales contract for you to sign.

Your next thought is likely – “Wait….what the hell am I looking at?”

You’ve done the proper analysis to find a good deal on a home – to make sure you buy right, but let’s not make any mistakes when it comes to the contract.

Let me first say the entire contract is important and this chapter does not constitute legal advice.   You should contact a legal professional for these matters.

However, there are some specific items on the sales contract that we should understand.

The examples below are from a Florida sales contract.  Contracts vary from state to state, but there are common elements to be aware of.  Having an understanding of these items assists in negotiations and helps avoid mistakes that could lose you your deposit.

Generally a sales contract will start with the name of the seller and the name of the buyer (you) followed by the property description.  It’s standard info your real estate agent will fill out, but verify it is all correct.

Price & Deposit Obligations

On most contracts you will see the sales price and deposit terms further down the first page.

When the deposit(s) are due and the amount upon offer acceptance

  • Three days in the case of the above example
  • It can be one or two deposits. In the example we have one $5k deposit as seen in line 2(a).

Time for acceptance:

  • This is the date the seller has till to accept your offer or it expires. (see sub-header  3)
  • This is important because you can’t leave an offer sitting out forever. You want to move on to the next property if this deal isn’t going to happen.

Closing Date

  • Last you see the closing date (sub-header 4). Make sure this is a date you can physically attend.

Financing Contingency

The financing contingency tells the seller whether you are paying cash or using financing for the purchase.  When securing a loan on a property purchase make sure the financing contingency is selected.

Whether it’s your financial situation or the lenders rules and requirements, things can change.  If for some reason you cannot secure a loan for the purchase this contingency allows you to exit the deal and get back your deposits.  Without it you are at risk to lose your deposit money.

Inspection Period

This is the most important item on the contract in my opinion

  • This gives you the right to inspect the property for X number of days after our offer is accepted.

The inspection is basically our other key contingency. After the inspection, we can either renegotiate with the seller if there our items in need of repair or we can simply walk away if the property’s condition is not satisfactory.

If a buyer decides they want to exit the deal they need to provide written notice to the seller within the allocated inspection period.

In the example above we did a 10-day inspection period, but you will often see seven days. Seven is the minimum I would do because it takes atleast a few days to get an inspector to the property.

You are now ready to submit that offer!

And if you are not already using the property calculator to analyze deals, then go get it already.  It’s on the homepage and free to download!

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Disclaimer: Info in this post is for educational purposes.  Always consult a licensed professional.

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