With the warmer weather comes the real estate season and it is essential that individuals understand how to protect themselves in one of the most important contracts they will ever enter into. Over the years there has been a growing trend whereby individuals are taking on the purchase and sale process without the assistance of real estate professionals. While one can appreciate the want and need to save a little money, most individuals do not have sufficient understanding of basic contract law to take on this responsibility alone and as such are jeopardizing their financial well-being.
By law, all contracts for land are required to be in writing, therefore the terms of purchase contract are entirely defined within the four corners of the written contract. Failure to properly define the terms of your agreement often leads to confrontation closings, increased closing fees and civil actions, as lawyers are left trying to negotiate resolution of issues which should have been addressed at the onset of the contract. In this blog we will briefly review some important elements of the residential agreement of purchase and sale.
For there to be a binding contract it must have an offer, acceptance and consideration. The deposit is the consideration portion of this requirement. It is a good-faith payment made on the contract confirming the buyer’s intention to complete the purchase. Typically, this deposit is paid to the vendor’s lawyer in trust and will be credited to the buyer as financial adjustments during the closing of the transaction.
This is the period of time in which a buyer will leave the offer open for consideration. Industry standard typically gives a seller 24 hours to consider the offer. This time period will change from offer to offer.
Chattels and Fixtures:
Chattels and fixtures are often a big area of disagreement and can significantly increase stress for all parties during the final days of the transaction. When drafting an agreement all parties should be very clear what items are included and excluded in the sale. The general thought is, if you were to shake your home up-side-down anything that sticks would be classified as a “fixture”, and is part of sale transaction, unless specified otherwise. Therefore, sellers need to be very clear if it is their intention to remove an item that is permanently fastened or affixed to the home. As a rule of thumb, where there is doubt with respect to an item it should be specifically included or excluded.
Conditions, conditions, conditions! One of the most important protection mechanisms in any purchase contract are the conditions. This is the opportunity given to buyers to conduct all necessary inquiries as to the state of the home and their financial ability to complete the contract before the contract is firm and binding. In this regard, all purchase contracts should have two kinds of conditions; the first being the financial condition and the second being inspection conditions.
In situations of competing offers some buyers are urged to make “clean offers” or offers without the condition of financing. Unless you are paying cash for a purchase, all buyers should have a condition of financing. Additionally, many buyers confuse “pre-approval” with actual approval and either do not include the financing condition or waive this condition pre-maturely. Unless you have received financial approval for the specific purchase, this condition should not be waived or omitted.
All purchase transactions are buyer beware and historically courts have taken the position that buyers have had ample opportunity in advance of closing to complete all necessary investigations to discover possible defects. Accordingly, buyers are strongly encouraged to include conditions of inspection, whether it be a general home inspection, septic inspection and/or water tests.
An agreement of purchase and sale is a complicated legal document and there is a lot to know and understand. For this reason, we strongly encouraged that you to contact Shankar Law Office before entering into any purchase contract to ensure your interests are properly protected.
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