Buying or Selling a House? Things You Should Know Before Signing the Purchase Agreement
If you're considering buying or selling a house you've got a lot to think about. Whether you're doing it on your own or using a real estate agent, however, you must give careful consideration to the purchase agreement you sign and deliver to the other party. Once you sign and deliver any document which states that one party agrees to buy and the other agrees to sell certain real estate for some price (even one "to be agreed upon"), it could well become a binding contract that one party can enforce against the other. Whether you're the buyer or the seller, take time to review each and every provision and be sure you understand them before signing a purchase agreement and giving it to the other party.
A buyer may first offer to purchase a home by giving the seller a proposed purchase agreement in writing. This is considered an offer, and usually starts off the negotiations. The parties are free to negotiate any terms and conditions they want when buying or selling a home. Once they agree to the terms, the buyer and seller will sign a final, binding document. This final document may be the buyer's original proposed agreement with many terms scratched off or hand-changed and initialed. There may be extra pages called "addendum" containing extra provisions, or stating that a certain provision is deleted and/or replaced with another. Make sure that both parties agree to and understand all these scratches and handwritten items. Make a statement that enumerates the total pages in the final document. It may be better to retype the whole agreement to avoid confusion.
Anyone can buy fill-in-the-blank purchase agreement forms from many companies that sell legal forms. Any realtor involved will likely offer a purchase agreement form commonly used in the state. These forms contain the most common provisions for the purchase and sale of real estate. You may also draft your own agreement, or have an attorney draft one for you. There is no law requiring you to use any particular form.
Whichever manner you choose, however, the written terms in the signed purchase agreement will govern any dispute which may arise. There may be terms that you didn't read or understand, or terms that you thought you changed by verbal agreement with your realtor or the other party. Regardless of your understanding, it is likely that you will be bound by the written terms if the other party feels you breached the agreement. If you are using a realtor, remember that he or she is probably not a lawyer, and although the realtor may be able to explain the meaning of most of the terms, he or she cannot explain the legal ramifications of agreeing to those terms, and you should not rely on the realtor's comments as a defense to any claim brought against you if you don't comply with the terms of the purchase agreement.
But wait! you say! I don't want to have to buy a house if, after signing a purchase agreement, I find out that the septic system is failing! I don't want to have to sell my house if I can't close on the purchase of a new one!
There are many reasons why a party may want to "agree to agree", but not be bound by a purchase agreement. Parties can use contingencies in the purchase agreement as a safety net. A carefully drafted contingency will allow for the cancellation of the purchase agreement in the event the stated contingency does not occur.
It is beyond the scope of this article to detail all of the provisions that a good purchase agreement should contain. In general, the preprinted forms cover the common terms, but are generic and may not give the buyer or seller the best protection. The user of a form should consult with legal counsel prior to signing the form to ensure the party's interests are adequately expressed and protected. There are some provisions that a party may want that are not contained in common forms. Although offer acceptance deadlines are commonplace in the forms, binding closing dates are not. If you must close on the purchase by a certain date, make sure that the purchase agreement specifies the latest date of closing and contains a provision for what happens if the other party does not close by that date. Forms commonly set out who should pay for taxes, assessments, and certain financing costs, but don't usually address who will pay for the various fees charged at the time of closing. The include the closer's fee, searches, title insurance, appraisers, surveys, recording fees, and other costs. You can negotiate who shall pay these fees and put it in a purchase agreement.
The last important thing to remember is that the purchase agreement is a contract which is enforceable for a long time. After you close on the property, keep the purchase agreement in a safe place. You may have an issue arise months after the closing and wonder whether or not you are responsible for the costs associated with it. The purchase agreement may well hold the answer. If you seek damages in court from the other party, you must have the purchase agreement to prove your claim.
The information contained in this article is not intended to be legal advice or to create a contract between the reader and the author. The reader is encouraged to seek appropriate legal counsel and not to rely on the information contained herein.