Now that I have taken you through the ideal steps for searching for a home, let’s discuss how the purchase contract works. Remember: I am by no means a real estate lawyer nor play one on TV. If you want a real estate lawyer’s discussion on this subject click on this link, to go below for William Fergus', Attorney at Law, seminar that he held at the Columbus Board of Realtors. There is a standardized form that the Columbus Board of Realtors has put in place for the licensed Real Estate members to use. There are nine pages of the document.
First Page: This concerns the location of the home to be purchased along with the price, when you are going to send the lender pre-approval letter, and the type of loan and how long it will take to obtain financing from your mortgage company (a.k.a. loan commitment).
Second Page: This page deals with approval from an attorney (if you want one involved to review the contract), any additional terms and conditions you want in the contract, and how the taxes and assessments (liens on the home or community development charges) are to be handled by the seller.
Third & Fourth Pages: Start out with what fixtures you want (examples: kitchen appliances, washer and dryer, etc.) and what you do not want (examples: swing set, tree house, washer & dryer, etc.).
It continues into the agreement for the inspection period for the buyer. This is a critical junction because the buyer has a margin of control to terminate the contract. If the buyer finds any structural damages through the inspections, the buyer can submit their termination of the contract. Otherwise, the buyer has an opportunity to negotiate for any major fixes that the inspector has found in his report. You have to submit a report of the home inspection with the summary of the items to be fixed. I recommend finding a home inspector that takes pictures of any problems. Pictures of the issues at hand usually convince the seller to take care of the problem.
Fifth Page: There are two warranties that are customary in Central Ohio for sellers to pay. They are a Home Warranty (i.e. ABC Gas, American Home Shield, First American, etc.) and a Gas Line Warranty (ABC Gas). Then the contract continues with how the seller is to convey the Deed, the Title Insurance, and any fees or charges on the property that are to be handled.
Sixth Page: Discusses what occurs if the unforeseen happens – damages or destruction. Prior to closing it is all handled by the seller. The buyer must be notified and at this time the buyer can proceed with (if any) insurance money that the seller is to receive OR rescind the contract.
At this time, there is a custom in Central Ohio for the buyer to place Earnest Money down on the home so that they are seen as serious in keeping the contract. This is totally optional for the buyer, but greatly encouraged. Like anything else putting some “skin” in the game keeps the person from backing out entirely. There are plenty of escape clauses and ways for the buyer to receive the earnest money back. For instance, if the buyer backs out because of the Home Inspection or due to Damages/Destruction of the home. However, that is about all of the options on receiving your earnest money back.
Seventh Page: This page gives notice that buyers and sellers are entitled to other professional opinions on this transaction such as law, tax, financing, surveying, structural conditions, hazardous materials, environmental conditions, inspections, engineering, etc. Also, there is a provision for Ohio Fair Housing Law.
Eighth Page: First thing on this page concerns the Residential Property Disclosure Form. This form is to be filled out by the seller. It informs you about any known issues that are detailed on the form of the house in the last five years. This is a very vital part, because without receipt, the buyer can rescind the contract. It continues to say that the buyer is responsible to check with the sheriff’s office concerning Sex Offender Registration and Notifications. There is a really good website that the Franklin County Sheriff’s site points you to that details crimes around a home.
Then the contract talks about broker releasing concession information to licenced appraisers. Next, the contract makes sure that the buyer has indeed looked at the home, that all agreements are written down, that time is of the essence and that people need to abide by the deadlines placed, term definitions, and finally how signatures are to be disseminated.
Ninth Page: The wrap up includes when the buyer and seller will close on the home and when the buyer will take possession of the home. Ideally for the buyer possession should occur the same day as the closing; but, that is always up for negotiation. The seller is required to remove all personal property and debris on the property by time of the buyer’s possession. Then we have the time period that the seller has to respond to the Buyers’ offer. Finally, signatures.
Next week I will go into how Negotiations usually shake out in purchasing a home.
William Fergus’ Purchase Contract Class:
Understanding the Residential Real Estate Purchase Contract, Part 1 from Columbus Board of REALTORS® on Vimeo.
Understanding the Residential Real Estate Purchase Contract, Part 2 from Columbus Board of REALTORS® on Vimeo.