Real Estate can quickly turn from exciting to complicated, especially in today's market. Hiring a real estate agent and finding your perfect home is fun, but the process of making an offer and getting financed can leave you a little overwhelmed if you haven't been through it before (and even if you have, it's still complicated). While you expect to make a purchase price, there are a number of items or contingencies that you really should include in your real estate contract before walking into a 30 year loan. With that in mind, today we'll discuss 3 Real Estate Contract Must-Haves.
1. Make sure to include financing terms in your Real Estate Contract
Unless you plan to make an all cash offer, chances are that you'll be taking out a mortgage to finance your new home purchase. As such, it's incredibly important that you pay attention to interest rates before making an offer. For example, today's mortgage rates are at an all time low, but what if they were to jump up a percentage point or more? Would you still be able to afford the house you've got your eyes on?
We actually encourage our clients to get pre-approved so they know exactly what they are working with before putting any earnest money down. Additionally, make sure that any offers you submit are contingent upon being able to get financing at a specific interest rate. You should also make sure that if you are trying to obtain a certain loan (such as FHA or VA) that those details are specified in your Real Estate Contract.
In today's market, sellers are frequently having to consider multiple offers, so it's important for buyers to be as transparent as possible with regard to how their offer sets them apart.
2. Be sure to designate who is paying closing costs - be specific in your Real Estate Contract
It is fairly common for the Buyer to request that the Seller pays for all or part of the closing costs as part of the Real Estate Contract. These expenses typically are on top of the purchase price of the house and we find that many sellers are willing to make this concession. That said, you cannot trust that the seller will automatically pay these fees - they must be included in the contract.
The contract should specifically state who is paying what including the home, escrow fees, title search fees, title insurance, notary fees, recording fees, transfer tax, attorney fees, etc. Your real estate agent should be able to advise you on most of these details but your Real Estate Attorney can also provide guidance.
3. Every Home Purchase Should Include a Home Inspection
If you are buying a home with the intention of living in that home, you should invest in a home inspection. You can also make the purchase of the house contingent upon the home inspection, which will allow you to walk away from the deal should the home inspection reveal excessive repairs or significant flaws to the home's structure.
Your real estate agent can provide a home inspector recommendation, but you can always hire one of your own choosing as long as they are licensed to work in the area in which you're purchasing.
Don't be Afraid to Walk Away From a Home
We know all too well how easy it can be to fall in love with a home, but it's really important to protect yourself as well, especially in today's housing market. Just because inventory is low does not mean that you should forfeit any of these contingencies. In fact, it could cost you! If any of the above are not met, you can cancel the deal and keep your deposit - but you have to write it into the contract.
Stay tuned as we unpack 3 more Real Estate Contract Must-Haves to include before locking yourself into a 30 year mortgage.