Tip About Contracts, Closing and Other Legal Issues
Ask These 5 Questions Before Making an Offer
Do research on your own and ask your real estate broker to get answers to these important questions:
- Is the asking price in line with prices of similar homes in the area?
- Is the home in good condition or will you have to spend a substantial amount of money making it the way you want it? Interior renovations for kitchens and baths, roof repairs, plumbing and electrical fixes can cost tens of thousands of dollars or more. Your real estate broker can help you arrange a home inspection from a qualified, reputable professional to determine this.
- How long has the home been on the market? If it’s been for sale for a while, the seller may be more eager to accept a lower offer.
- How much mortgage will be required? Make sure you can afford whatever offer you make.
- How much do you really want the home? The closer you are to the asking price, the more likely your offer will be accepted. In some cases, you may even want to offer more than the asking price, if you know you are competing with others for the house.
The Real Estate Contract
Your Benworth Private Lending professional can help you prepare the details of your specific real estate contract, but it never hurts to understand the basic requirements that must be present to make it a valid contract:
Meeting of the minds. There must be mutual agreement on what the buyer is offering and what the seller is providing. This is not only for the purchase price, but also may also include appliances and furniture included in the sale, a deadline to complete the closing, and other details.
Get it in writing. A contract for the purchase and sale of real estate must be in writing to be enforceable. That means that if the buyer makes an offer in writing and the seller accepts only in a phone conversation (without signing the contract) and then changes his mind, the buyer cannot force the sale.
Identify the parties. The contract must identify the parties involved in the sale, such as full names including middle initials. If one of the parties is a corporation, it should clearly state the name of the corporation (e.g., “Florida Home Investors, Inc., a Florida Corporation”).
Identify the property. This typically includes the property’s legal description including address, parcel number, plat information and other details. A vague description such as “my home on the water” is probably not specific enough to create a binding contract.
Purchase price. The contract must state the purchase price for the property – the amount the buyer is offering to pay the seller.
Consideration. This is the benefit, interest or value that induces a promise. In the case of a real estate contract, it’s the buyer’s earnest money. It shows that the buyer is serious about his or her offer.
Sign on the dotted line. In order to be enforceable, a contract must signed by parties who are of legal age and sound mind. A notary’s signature or witness is not required although that is advisable. A faxed signature is usually acceptable, as long as the contract states that faxed signatures are valid.
The Real Estate Closing
A real estate closing may sound daunting, but it’s really quite simple:
Walkthrough. Before you go to the actual closing meeting, complete a final walkthrough of the property to confirm that the condition of the home is as it should be, as specified in the sales contract.
Certified or Cashier’s Check. At closing, you will pay for the down payment (the amount not financed by your lender) and your share of the closing costs. A personal check will not be accepted, so bring a certified check or a cashier’s check. Your lender will provide a lender’s check for the amount they are financing.
Proof of Insurance. Bring a copy of and proof of payment for your homeowner’s insurance, plus your windstorm and flood insurance policies (if you have one) for your lender to review before finalizing the closing.
Identification. Bring proof of your identification, such as your driver’s license or passport.
Documents. Both the buyer and seller will be required to sign several documents, which will be filed with the County, including:
- Purchase agreement
- Promissory note for the loan
- Mortgage documents
- Title documents
- Settlement statement
- Truth in lending statement (outlines the costs of the loan, your payment schedule and amount financed)
- Deed to the home to transfer ownership of the property to you