A properly written contract sets forth the terms of the sale and protects the interests of both buyer and seller.
The contract specifies the terms of the sale and the rights and obligations of the buyer and the seller. A well-written document protects both parties, while a poorly drafted contract can cause serious problems.
Get it in Writing
Oral agreements are usually difficult or impossible to enforce, so if you've negotiated your purchase verbally make sure to have contracts signed as soon as possible.
Always make sure that any contract you sign has an attorney review clause that allows you time (at least three business days - preferably five) to review the document and have it checked out by your lawyer if you feel it is necessary. Many states specify a mandatory review period, whether it is specified or not, but don't take any chances - make sure it's in writing. This gives you the chance to make sure all bases are covered before you are committed.
Choose an Attorney or Escrow Company
In some areas it is standard practice to retain an attorney to handle the closing. In others the norm is to have the title or escrow company handle the transaction. If you do hire an attorney (which is a good idea), try and find someone local who specializes in real estate closings. An experienced real estate attorney can help you move quickly to closing and sidestep any problems or oversights. If you are using an escrow company, make sure that they have a solid track record.
Cover All Contingencies
Make sure that the contract covers all contingencies of the purchase and allows sufficient time for any required activities or testing (i.e. obtaining a mortgage, home inspections, etc.). Reasonable contingencies are essential to protecting yourself in the purchase - don't allow anyone to pressure you into skimping on due diligence.
Learn About Deeds and Title
The deed is a legal document that transfers ownership of the home. There are several types of deed that can be used for your purchase as well as a number of special provisions that may apply to your new home. Your attorney or escrow agent can answer any questions you have on title and deeds.
Know Your Deposit Obligations
The contract should specify the due dates and disposition of earnest money and deposits. Typically a small amount is posted at the signing of the contract with the balance of the deposit (usually 10% of the purchase price) due within 1-3 weeks. Don't agree to a schedule you cannot meet - if you need extra time to line up the funds, specify this in the contract.
Using a Real Estate Attorney
In many areas it is standard practice to hire a real estate attorney to close a purchase. In others, escrow companies are typically used for this purpose.
While escrow companies are often perfectly capable, they do not represent you in the way an attorney does. An attorney is charged with protecting your interests, so you may want to consider using one even if it is not normal practice in your area.
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