A real estate purchase agreement is a complex legal document with about 100 paragraphs of legalese and pages of disclosures, addendums, and amendments that need to be properly prepared to avoid misunderstandings, address how conflicts will be addressed, and more importantly close as agreed.
Because it is an enforceable legal document, errors can be costly, so we want to make sure you carefully and completely prepare or review any purchase agreement before signing.
9 tips for how to prepare and complete real estate documents on your own.
Tip 1. Prepare
Review the purchase agreement ahead of to become familiar with it.
- What fields need to be completed?
- Do you have all the necessary information to do so?
- Do you know what should be checked or left blank?
If you aren’t sure, seek assistance from an attorney or an independent agent (Do not trust the buyer’s agent to represent you. Even if you are paying them a buyer’s agent commission, the buyer agent represents the buyer).
Taking the time to carefully review the agreement and other forms and being prepared in advance will make the rest of the process that much smoother.
Tip 2. Names
Make sure you have the correct names and spellings of the parties involved before sending documents off for signature. Spelling errors have a way of multiplying. Trying to redo everything may be an arduous task. The negotiation process is stressful enough, so adding unnecessary stress will not instill confidence in your buyer. Ask the buyer exactly how they want their names, or in some buyers’ cases, the name of a trust or LLC — to appear on a contract.
Tip 3. Property Address, Legal Description, or Parcel Number
You never want to make a costly mistake by writing in the wrong property address, legal description, or parcel number. Always double-check the county records to get it right.
Don’t overlook applicable unit numbers or letters if the residence is attached or part of a condominium. The same goes if there is a separate garage, part of a shared garage, or carport that goes with the home. Be sure to reference any assigned parking space numbers as well.
Tip 4. The Numbers
Make sure you carefully input the purchase price along with the earnest money deposit, down payment, and loan amount (if applicable). Ensure that all these items are filled out in the correct spaces and added up correctly. None if these line items should be left blank.
Also, make sure that the buyer has a pre-approval letter and that the proof of funds matches the purchase price. Lastly, make sure that the type of financing matches the property type you are selling.
Tip 5. Contract Timelines
It is critically important to ensure that all timelines line up in the written agreement. You need to review each timeline to ensure they are consistent with what is required for the transaction and that the dates can be met. This applies to earnest money deposits, loan approval contingencies, inspection contingencies, appraisal contingencies, and closing dates.
Tip 6. Closing Costs
Which closing costs a buyer or seller pays typically go on the local custom in the specific market in which the property is located. If in doubt, check with an experienced agent, mortgage officer, title or escrow company who can provide some insight. Beware that escrow companies cannot give advice or represent either party in the transaction, they are required to be neutral and only carry out what the buyer and seller have already agreed to.
Tip 7. Home Warranty
If you are buying a home warranty for the buyer at closing, you should specify the company, the specific kind of plan (most have different levels of coverage), and the maximum price.
Tip 8. Furniture and Personal Property
If any furniture or other items are trading with the property, make sure it is not referenced as part of the purchase agreement as it can trigger sales tax. A mortgage underwriter will flag this language, requiring an addendum, stating that these items convey at no value and are being left as a courtesy. If funds are being exchanged for personal items, that transaction should be handled as a separate transaction, in a separate document, such as a bill of sale between the parties.
Tip 9. What Stays and What Doesn’t
Make sure you take time to carefully specify or check all boxes indicating what appliances are staying, including things like the washer and dryer, a wine cooler, etc. In addition, you should specify if bathroom mirrors, drapes, rods, drapery hardware, and TV brackets are staying or being removed. Mounted flatscreen televisions, additional refrigerators, and freezers in garages, removable sheds, or pool safety fences are also items that can be rife for confusion. Smart home devices like video doorbells, cameras, and thermostats need to be clarified as well. Never assume something is automatically conveying, so when in doubt, write it out.
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