Introduction
A real estate transaction often involves a lot of research and paperwork. Due to a heavy workload of fulfilling seemingly endless requirements, we often forget to include some of the most important clauses in the agreement. To help you close the deal properly, following is a brief list of what to look for in a purchase and sales agreement in Colorado:
Earnest Money
If the buyer is serious in buying a real estate, it is practical to sign an earnest money agreement. The agreement ensures the seller that it’s safe to take the listing off the market because the buyer has deposited money in earnest of good faith. Generally, it is the first step in acknowledging that both the seller and the buyer are ready to close the deal.
Inclusions – Fixtures and Fittings
It is important to explicitly mention what is included in the sale of the property. A lot of time, the buyer takes certain fixtures and appliance for granted. Sometimes, certain sellers also include furniture in the final purchase price; therefore, it makes sense to clearly state what’s included and what’s not for sale.
Contingencies
If you’re a buyer, make sure that you list all contingencies in the agreement with the seller. Contingencies are conditions in the sale agreement that tells the seller that the transaction is based on certain conditions such as checking the title of the home; home inspection; financing options; and other parameters. Writing Contingencies will give the buyer time to finance, evaluate and fulfill legal requirements.
Important Dates
When signing a real estate agreement, don’t forget to write two key dates: sales date and transaction date. Both parties should understand that it may take more than a day to transfer the property to a buyer’s name due to the limitations of bank transfers. Once the buyer has deposited the amount, the settlement date can also take time if there is a weekend or a public holiday.
Use The Right Documents
Ensure that you are filing the correct form as a real estate purchase can contain a lot of different forms that need to be filled. In the United States, many States have their own versions of sales and purchase agreement deeds, which are not suitable for use in another State. In fact, you may also need to fill forms related to local ordinance.
Who Pays The Fees and When?
The closing fee of a home can be anywhere from 2% to 7% of the total price of the property. For a home priced at $500,000, you are looking at a closing cost of approximately $10K to $35K. This is a lot of money; therefore, it makes sense to either split the cost 50/50 or specify which closing fee the seller and the buyer will pay to meet their obligations.
Escrow Fees
Just like the closing fee, terms of agreements regarding escrow amount are also necessary for proper handling of real estate transactions. The escrow fee is usually 1% to 2% of the home price, which guarantees good faith from the buyer. Always make sure that rental agreement contains a clause of what happens with the “deposit money” if the seller or the buyer fails to meet their respective obligations.
Transfer Clauses
Any cash given to the seller or another party related to the purchase of a home before the transfer of the title deed should contain a definite clause on terms of transfer. For instance, escrow payments should accompany conditions of what will happen to the escrow payment if the deal is not finalized.
Timeframes
It is very common for the seller and the buyer to verbally settle time frames to study and sign a certain agreement. These verbal agreements are the cause of deliberations and unnecessary delays. If time frames are not written, it is possible for both parties to inadvertently delay singing and reading the contract forms.
On the other hand, it’s also normal for both parties to unnecessarily insist others to sign the document depending on their respective interest in the transaction. Under these circumstances, it is important that every real estate agreement offer written guidelines of the time required to sign forms and legal documents.
Warranties
A home warranty will ensure that things will not start breaking and malfunctioning as soon as the buyer moves in. It costs anywhere from $500 to $3000 as a one-time fee. Depending on the local custom, many sellers give home warranties to buyers as a gift at the end of the sale. It is often a good idea for the seller to give home warranty knowing that the buyer will not come to the seller after the purchase if something malfunctions. Sometimes, the buyer also purchases the warranty to protect them of potential repairs after moving in.
Conclusion
Sales agreements contain important information on a real estate transaction. It’s important for both buyers, sellers and any intermediaries to be mindful of details stated in the agreement, as they virtually all have financial consequences if not followed through as agreed. If you’re ever unsure about a point in the agreement, make sure to ask your real estate agent for clarification.