Five Things to Look Out For on The Purchase Contract
There are a ton of things to think about when looking at a purchase contract with an agent that is about to be submitted on your dream home. There are nerves, anxiety, and happiness all at once. It’s a huge day for everyone including the real estate agents involved and there are five things to look out for while going over the contract:
- Price is the biggest thing! That is why I put it at number one, and everything else falls into line after it. If there is a price range that you, your spouse, and your loan professional have set; do not allow your agent or anyone else persuade you to write down a higher number or an incorrect price that was not discussed.
It would be a huge problem when getting into a contract with a seller and you are over budget to get into the home. This is not just an issue that will cause the loan officer some heartache, it could put you over budget and create financial stress to meet the needs of the mortgage. Stick to your guns!
- The down payment amount, this is another double check for a client to an agent. There should be a set, down payment that was calculated between both interested parties involve, and that number should always be the same since it is determined by a percentage of the offer.
If Someone on the team (you, your spouse or your agent) does not agree, then have an open line of communication to mend the misunderstanding prior to submitting the offer. A down payment can change very quickly when working on a contract for a home due to the size of the numbers that are involved.
- Earnest money deposit, or EMD is the money that will be submitted to the escrow company to hold during the transaction to show good faith on the buyer’s part. This money will not be touched by any party, and is held in escrow till the close of escrow or the escrow is canceled.
As this is a money deposit placed in the escrow account that will go towards your down payment, it still is a number that should be known going into the transaction. EMD can range from 1% up to %5 of the offer price on the contract. As this is substantial money amounts all parties should know what is going where.
- Is this offer going to be contingent and if it is will the market support this type of offer? And if it is contingent be sure to know that it may be a low priority offer for the sellers because it may take longer than expected to sell a property. This is the reason agents and sellers want to know if the property is in escrow. That holds more weight going into negotiations.
Unsure your offer will be rejected, know that if there are no offers on your current home, the property being sold is not in escrow; then the offer has a low probability being accepted. Know your position in the running, for that, ask your agent.
- The last tidbit would be to make sure you know all the fees and vendors the agent uses. These are negotiated between both sides of the transaction and in Southern California the seller’s get different privileges for picking vendors, and the buyer’s different privileges as well. That being said, as the buyer working with your agent writing the offers there needs to be clear discussion on these subjects that are within the contract, and something that can ultimately affect the outcome of the bottom line.
As the buyer this should be discussed with the agent representing you and your family, and the reason is that these vendors that are picked by the other agent and seller are typically the title company, escrow company, and sometimes the home warranty company. All of these vendors and third-party companies may be needed down the road after a home sale is complete, or even called upon through a transaction that would create an issue.
Bottomline; you need to have a direct line to your agent that gives you the ability to speak candidly to them and make sure they are making the best decisions for you.