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Home Purchase and Sale Agreement
©2024, Melissa C. Marsh.
Written: 12/1/2000  
By: Melissa C. Marsh

Introduction To Buying A Home

Buying or selling a house does not have to be stressful... but without the advice of a competent Real Estate attorney to guide you through the process, it can be a disaster! During the home buying process, after you have located that perfect property, your real estate broker probably will give you a preprinted purchase and sale agreement. Read ALL of the documentation carefully and know that both changes and additions to this pre-printed form agreement can be made. If this is your first home purchase, or if you don't completely understand every clause in the contract do not ask your agent or broker. Their main concern is that the sale goes through. Seek the advice of a local real estate attorney. The remainder of this article will list and discuss 9 issues a buyer should take notice of in the purchase and sale agreement.

1. Price

For most, if not all, home buyers, the sales price is the most important term of the purchase and sale contract. However, it is not the only term, and many others are just as, if not more important than, the selling price.

2. Title

"Title" refers to who presently owns the house. First, you want to make sure that the seller is the actual owner. You, the Buyer, want to ensure that the "Chain of Title" shows the seller as the owner. The seller should provide Title free and clear of all liens and encumbrances by others. To ensure the title is clear, the Buyer should request a title search be conducted. Who pays for the title search is a negotiable term.

3. Move-in Date and Personal Property

The purchase and sale agreement show state a move-in date and what, if any, personal property is being sold with the real estate. If you, the buyer, are expecting certain appliances and other fixtures to be there upon move-in, those items should be listed in the purchase and sale agreement.

4. Mortgage Exit Clause

Sometimes an interested buyer who enters into a purchase and sale agreement with every intent on purchasing the home is just unable to secure a mortgage for that home. Other times, the interested buyer can secure a mortgage, but due to unforeseen reasons is unable to secure a mortgage at a favorable interest rate. When this happens, what happens to the deposit? Well, absent a clause to the contrary the deposit may be withheld as non-refundable. The purchase and sale agreement should therefore provide that your deposit is refundable if the sale is canceled because you are either unable to secure a mortgage loan, or mortgage financing at an interest rate at or below a specified rate.

5. Termite Inspection

Prior to the providing financing, the buyer's lender will require a certificate from a qualified inspector stating that the home is free from termites and other pests and pest damage. So what happens if the home is termite infested? Well, that could become the buyer's nightmare. However, as the buyer you can request this issue be addressed in the purchase and sale agreement. The clause may say something like: "if pest damage is found, you the buyer reserve the right to cancel the purchase and sale agreement". Alternatively, the clause may say, "if pest damage is found, you the buyer reserve the right demand immediate treatment and repairs by the seller."

6. Home Inspection

In addition to the Termite Inspection, prior to the purchase being finalized, the buyer should secure and personally pay for a home inspection from a licensed qualified inspector. Such an inspection should determine: (1) the condition of the plumbing, heating, cooling, and electrical systems; (2) the condition of the structure itself, including the roof, siding, windows and doors; and (3) the lot, which should be graded away from the house so water does not drain toward the house and into the basement (in turn causing water damage). Again in the purchase and sale agreement, the buyer should reserve the right to cancel if unsatisfied with the inspection results. In addition, such a clause may provide that if unfavorable conditions exist, the buyer reserve the right demand the seller make immediate repairs, or reduce the sale's price according to the reasonable value of the needed repairs."

7. Lead Based Paint for Homes Built Before 1978

If you buy a home built before 1978, you have certain rights concerning lead-based paint and lead poisoning hazards. The seller must: (1) give the buyer a copy of the EPA pamphlet "Protect Your Family From Lead in Your Home" or other EPA-approved lead hazard information; (2) relay any actual knowledge he has about the home's lead-based paint, or lead-based paint hazards, and provide the buyer with any relevant records or reports; and (3) attach a disclosure form to the purchase and sake agreement which will include a Lead Warning Statement and place for all parties to acknowledge and sign. As the buyer, you have at least ten (10) days to do an inspection or risk assessment for lead-based paint or lead-based paint hazards. However, to have the right to cancel the sale based on the results of an inspection or risk assessment, you will need to negotiate this condition with the seller and have the clause specifically included in the purchase and sale agreement.

8. Who Pays What Real Property Expenses

Most, if not all, property is subject to some form of expense such as taxes, water and sewer charges, and utility bills. The buyer come to an agreement with the seller on how such expenses, related to the property, will be divided on the date of closing. Unless you agree to otherwise, the buyer should only be responsible for the portion of the real property expenses owed after the date of closing.

9. Escrow

Depending on local practices, the buyer may have the option of selecting the escrow agent or escrow company. For states where an escrow agent or company will handle the closing, detailed instructions on the buyer's, seller's and lender's responsibilities should be provided in the escrow agreement. In addition, who bears the cost of the escrow is a negotiable term and different escrow and closing related fees may be borne by different parties.

Obviously the above list only covers some of the important terms that should be included in a home purchase and sale agreement. As your home purchase will probably be the most expensive purchase you make, it may be wise to have a local real estate attorney review the documentation before you sign on the dotted line. Unfortunately, while there are some honest real estate brokers and agents out there, their main intent is to ensure the sale goes through. The buyer on the other hand wants to ensure he is getting what he paid for, not unforeseen problems.

Disclaimer: This article contains information gathered from the Federal Consumer Information Center.

Copyright 1999-2024 Melissa C. Marsh. All Rights Reserved. All Information on this website is subject to a Disclaimer and Use Agreement. This information is provided as general information only and should not be construed as legal advice. We advise you to seek the advice of competent legal counsel to address your own specific questions, facts and circumstances.

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