When buying real estate, regardless of the type or price, you'll soon find yourself drowning in a mound of paperwork. While it's tempting to sign everything and hope for the best, doing so puts you at risk of making a mistake.
It's critical to review the finer details of your real estate contract, paying close attention to any clauses that could cause a problem down the road. Here are some of the most common:
- Inclusions and exclusions: For example, when buying a home, this outlines what the seller is to leave and what they're permitted to take. Maybe you're expecting the person to leave all the appliances, just to find that they want to take them. This is a sticking point in many real estate contracts.
- Earnest money: When buying real estate, you'll put up earnest money (also known as hand money) to show that you're serious. It's important that the money be held by an escrow agency, not the seller.
- Closing clauses: Your real estate contract will include quite a bit of language regarding the closing, such as when and where it will take place and the reasons an extension may come into play.
- Warranties: While not included in every real estate transaction, the seller may offer some type of warranty to the buyer. Whole house home warranties, which are serviced by a third party company, are extremely common.
- Possession of the property: As a buyer, it's likely that you want to take possession of the home on the same day as your closing. If the seller wants to continue to live there, such as until their new home is ready, add a rental clause to ensure that you're compensated accordingly.
Not only is it a challenge to review a real estate contract from start to finish, but it's just as difficult to understand the clauses and the impact they'll have on your transaction.
If you're in the process of buying a home, take as much time as necessary to review your contract and request changes. It often makes sense to hire a legal professional to help with this process, as doing so will put your mind at ease while helping avoid future trouble.