Real Estate Contracts: What to Look For
When you finally receive an offer on your home, you’ll receive a contract with several pages of terms and conditions and multiple additional documents. Most real estate contracts are prepared in such a way that they protect both the buyer and seller, especially in California where the typical contract is provided by the California Association of Realtors®, but often the buyers and sellers don’t know what to look for. The following are some clauses you should look for in an offer, and some that should be viewed with scrutiny. As experienced real estate attorneys in Temecula and throughout Southern California, we can help you locate these clauses and explain them in detail.
Financing. One very important component of the contract is the financing contingency clause. This clause is designed to protect the buyer in the case his or her loan falls through unexpectedly, allowing the earnest money deposit to be returned and rendering the contract null and void if financing does not go as planned. Sellers should be aware that this clause means they cannot keep the earnest money if the loan falls through, and the sale of the home is not guaranteed until the loan is closed, or as otherwise provided in the contract.
Inspection. During the process of a home sale, it is normal for buyers to have a home inspection by a professional inspector. However, the home inspection contingencies included in sale contracts can vary, so it’s important for both buyers and sellers to read them carefully. In most cases a buyer can ask the seller to make certain repairs, though the seller is not obligated to agree to the request. Typically the buyern walk away from the contract if the home inspection shows excessive defects in the home.
Sale of Existing Home. The Sale of Existing Home contingency allows buyers to make an offer on a home, contingent on the sale of their current home. While this is a common situation, sellers who need to make a quick sale might want to be wary of this clause, as it can cause complications and delay the sale.
Closing Costs. Buyers often ask sellers to pay closing costs, in order to reduce the cash on hand needed at closing time. In some situations this might be acceptable, but the seller should always look for this clause and do the math before accepting the buyer’s offer. It will reduce the profit made off the sale of the home. Consult one of the qualified real estate attorneys in Temecula to discuss closing costs and decide what is reasonable for you to pay.
Real estate contracts can be confusing, but you should fully understand the entire contract before accepting any offer on your home. Contact our Temecula real estate law team for more information and make sure there are no unpleasant surprises on closing day.