No matter how business savvy you are, property transfers are not easy to decipher. Unless you work in real estate or for a title company, you may only see these documents a few times in your life.
However, the purchase contract is among the most important documents you will encounter when purchasing a home, commercial space, or investment property. This detailed document includes the finer points of the purchase price, transfer deadline, and any contingencies to meet to complete the sale. It should be a go-to document that you refer to regularly as your property closing date approaches.
Due to the importance of this document, we were thrilled to sit down with title agency owner Alex Lopez, CEO of New Door Property Transfer, to learn his tips for understanding purchasing contracts.
Lopez, for his part, was happy to share the advice he has collected from his years in the real estate industry. “I’m passionate about helping people change their lives; real estate is a vehicle for me to help them achieve their goals and property transfers are a big part of buying and selling,” he said.
Drill Down on the Details
At its heart, the purchase contract is a legally binding promise between a buyer and seller. It should outline each detail negotiated, from agreements about property upgrades to the date when the buyer receives the keys. It is important for both the buyer and seller to review every detail to ensure there are no mistakes or overlooked details.
Lopez noted that some of the basics of a purchase contract will vary depending on which state you are purchasing property in.
It may seem overwhelming to comb through these business documents, but it is well worth your time. If a price is incorrect, a property update is not mentioned, or a date is mistyped, it could have serious negative repercussions for both buyers and sellers.
If you’re finding the details unfathomable, it’s easy to reach out to an industry professional to explain the terms, conditions, and transfer details to you. Lopez and his team at New Door Property Transfer are happy to explain these documents to clients every day.
Follow the Money
Among the most important details to be found in a purchase agreement are details about financing.
In addition to points about funding the real estate purchase — for example, a cash sale versus bank financing — the document will also contain other financial details that are important to review.
This section of the purchase contract should clearly define how much earnest money (money paid to confirm a contract) was paid, where it is held during the closing period, and what should happen to it in case you cancel the sale.
“Although these documents are written by the professional agents of both the buying and selling parties, human errors can occur and each line should be double-checked,” Lopez explained.
Disclosures and Contingencies
Your purchase agreement will contain all disclosures and any contingencies.
Disclosures are irregularities and non-standard details about the property that the seller must legally disclose. They most often cover problems, issues, or damage to the property but may also detail legal issues related to the address including judgments or liens (a right to keep possession of property belonging to another person until a debt owed by that person is discharged). There should be no surprises here as these issues were likely discussed during the negotiations.
Contingencies are things that need to be done before the sale is finalized. These can include agreed-upon updates to the property or the sale of the buyer’s previous home so that they can fund the purchase. Contingencies also often note that the sale is dependent on a home inspection before closing and that the home appraisal comes back at the same value as the sale.
When Not to Sign
If you have a legitimate issue or see a problem with the contract, you are well within your rights to refuse to sign the paperwork.
Another reason buyers or sellers might decide not to sign is if the language is not clear enough. Any ambiguity in contractual wording could cause legal problems at the closing or in the future if the buyer and seller interpret vague language in different ways.
“It is infinitely preferable to have the contract reworded before signing than to sign something that is not clear,” said Lopez.
The contract is your chance to review every detail of the purchase and provides a chance to back out of a pending agreement.
If you’re the buyer, you may lose your earnest money, but that is preferable to purchasing a property of which you are unsure. Finally, Lopez advises that you get advice from a professional if you are considering canceling a sale since the laws in each state differ on when — or if — a contract can be voided or canceled.
A wealth of knowledge, we hope this introduction to real estate purchasing contracts helped you get your feet wet. Best of luck on your next property purchasing adventure!
About New Door Property Transfer
New Door Property Transfer provides smooth home property title transfers and closing services for consumers, lenders, and investors. The company was founded in 2019 by CEO Alex Lopez, Founder of homewayre.com. For more information, visit https://newdoorpt.com
