Being a rental property investor in Lutz, you know that buying property is essential for portfolio growth. To purchase with confidence, you must have a thorough understanding of the real estate purchase contract. The real estate purchase contract is a document that defines the sale’s terms and conditions between buyer and seller. In this blog post, we’ll highlight the critical sections of a real estate purchase contract that every investor should know!
Earnest Money Deposit
The earnest money deposit typically ranges from 1% to 3% or 4% of the purchase price. You put this amount in escrow with your offer to demonstrate to the seller that you are serious about buying the property. When the sale closes, the earnest money deposit is applied to the purchase price.
Offer to Purchase
The Offer to Purchase section opens with a thorough description of the property. Examine this description closely to verify it contains the correct property details you are bidding for.
It is also likely to have a list of items that are included and excluded from the sale. It’s essential to closely review these lists, as the seller can exclude almost anything from the sale.
Purchase Price
One of the most critical parts of the real estate purchase contract is the purchase price section. Here, you agree to pay the specified amount to gain property ownership.
Furthermore, it’s vital to account for any additional fees or costs tied to the sale, including the seller paying for closing costs. This section also covers your payment plan for the property, including whether you’ll use financing or cash, and the cash amount you’ll bring to settlement.
Seller Disclosures
Any known issues, physical or legal, are covered in the seller disclosures section. This covers any pending lawsuits, environmental concerns, or the necessity for a new roof.
Typically, you should take this information into account when making an offer. Should the seller fail to disclose known issues, and you find them after closing, the seller could be responsible for damages.
Contingencies
Another key section of a real estate purchase contract is the contingency section. This section specifies all the conditions that must be met before closing, such as obtaining financing, conducting an inspection, and having a clear title.
These contingencies are typically waived automatically if the buyer doesn’t act. Reviewing these contingencies is important to understand the process and the time you have to meet the requirements.
Inspection Period
After submitting the offer, the inspection period allows you to cancel the purchase contract for various reasons. For instance, you may uncover a major defect in the property and opt not to buy it, or you might have buyer’s remorse.
The inspection period lets you cancel the contract without penalty if you discover something that wasn’t found in the initial inspection.
Assessments and Financial Obligations
This section lists any current or future assessments along with their financial obligations. If a significant project is proposed in the area where the property is located, this section will describe the project and any related costs.
It may also list any outstanding fees you will need to cover at closing, such as property taxes, HOA fees, special assessments, or utility bills. It’s essential to carefully review this information to grasp any financial obligations you may face due to the purchase.
Closing and Settlement
This section of the real estate contract provides details on the time and place for settling the sale. It generally specifies an expected date for the property transfer. While buyers often assume possession happens at closing, this isn’t always the case. Thus, it’s important to thoroughly review the closing section of your contract to prevent unforeseen timing issues.
Offer and Time for Acceptance
The last sections of a real estate contract generally outline key dates to note, such as the offer’s expiration date and time and contract deadlines. A real estate purchase contract is valid only upon the seller’s acceptance of your offer. The offer and acceptance section details the time frame for making your offer, the period the seller has to accept it, and when the buyer must provide a deposit. This section may also indicate the start of contingencies and the time you have to fulfill these terms.
Acceptance/Counteroffer/Rejection
Once you’ve reviewed the real estate purchase contract and are prepared to submit your offer, you must sign at the bottom to indicate acceptance or rejection. If the seller accepts your offer, the purchase agreement becomes binding, and you must proceed with the transaction as per the contract terms.
If the seller decides to counteroffer, responding to your initial offer, this paragraph will be included in your purchase agreement. The seller’s counteroffer could contain different terms or suggest a new purchase price. If you accept the counteroffer, you have to sign and return it to confirm acceptance.
Having a rental market expert to help navigate the complex aspects of buying an investment property can be very beneficial. Real Property Management Zenith can assist at every step, from the initial purchase to ongoing property management in Lutz. Contact us online or by calling 813-698-1001 to learn more about what we offer investors.
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