Real Estate Purchase Contract 101
Saratoga Real Estate Purchase Contract Explained By Roohan Realty
Q: I want to purchase my first home, but I am on a tight budget. What if I cannot get the mortgage rate I expect or there are problems foundwith the home that I am not anticipating and cannot afford to fix?
A: Deanna Wolfe of Roohan Realty: Every real estate purchase contract in New York State contains contingencies- written clauses that are designed to protect both the buyer and seller of a home. They allow both parties to fully evaluate all aspects of a contract and property before proceeding to closing.
Contingencies are very important to buyers because they can protect against any large, unanticipated expenses for repairs after closing. At the same time they also help to alert sellers to unknown problems such as a buyer's inability to qualify for a mortgage or their need to sell a current home before purchasing the new one.
Saratoga real estate purchase contracts used by Realtors in our area include the most common contingencies:
First, "Attorney Approval", which allows the written contract to be looked over and agreed upon by both the buyer's and seller's attorneys. A time frame for this contingency is specified and changes may be suggested and agreed upon during that time.
Second, a "Mortgage Contingency" spells out the amount of money that will be deposited for the home, the amount to be financed and a deadline for applying and receiving mortgage approval. If the buyer is unable to obtain the financing spelled out in the contract, they will no longer be obligated to purchase. For this reason many sellers will insist on a pre-approval letter from a lender before accepting an offer.
Third, an "Inspection Contingency" will appear in your Saratoga real estate contract. This can include structural, pest, radon, mold, lead paint, well water and septic system depending on the particular property. A licensed home inspector will look over the home and offer detailed information about repairs or replacements that are necessary. If a single inspection issue has a cost of more than $1,500 to correct (the figure used in our area) then the buyer will have the right to renegotiate or void the purchase contract. The seller is also protected by this clause because inspection issues that are below $1,500 to correct are considered normal wear and tear.
Often a buyer may write a real estate purchase contract while needing to sell their current home. In this case, an additional contingency-commonly referred to as a "48 Hour Contingency"- will be added regarding the sale of the purchaser's property. The seller may choose not to accept this type of contingency as the buyer is not obligated to follow through to purchase unless their current home sells within the time frame stated.
The bottom line is every contract is unique and can be tailored to suit the buyers and the sellers. Contract contingencies can be written and added to address any concern. Your Realtor and attorney will provide assistance in turning your particulars into contingencies that can be written in and added as needed.
A fair contract that includes clear and concise expectations will protect all parties, minimize confusion and streamline the process for all.