Understanding the Purchase Agreement

VERSION MAY 2014

How to Execute Your Purchase Agreement:

  • Page 1 - These are the financial terms of the offer.  Double check your name is spelled correctly and the property address.  EARNEST MONEY DEPOSIT is the amount of funds you will have to wire within one business day of the seller accepting your contract.  This becomes part of your down payment (so you would have that much less to send in at the final closing).  TOTAL PURCHASE PRICE should match the offer price.  ( Initial at the bottom )
  • Page 2 - If getting a loan, the first paragraph indicates the loan application has been submitted. Line 15 references the APPRAISAL contingency.  If the lender's appraiser indicates in his report that the property is not worth the purchase price, we can negotiate with the seller for a resolution or cancel if no resolution is possible.  If the appraiser determines the price matches or exceeds the sales price, we can proceed with no further negotiations needed.  Your lender will order the appraisal immediately after we have an accepted contract.  Line 42 begins the paragraph on FIXTURES AND PERSONAL PROPERTY references the items you are requesting the seller to leave.  Most items are in the contract in a boilerplate fashion, double check that every item you want is listed in this section.   ( Initial at the bottom )
  • Page 3 - Paragraph 5 refers to the OPENING OF ESCROW, which is what happens immediately after your contract is accepted by the Seller, and you wire in your EARNEST MONEY DEPOSIT.  The Escrow company handles all funds in the transaction, and also issues title insurance to you at closing.  Paragraph 7 lists all costs paid by Buyer or Seller.  Unless otherwise noted to you, these are the traditional Buyer/Seller costs in our local market.   ( Initial at the bottom )
  • Page 4 - More expenses are listed here.  Please note any inspections are the buyer's cost, and if they are listed as "Waived" it does NOT mean you can't ask for them later.  Typically (unless you request otherwise) the Home Inspector would be the one to recommend further inspections, then we can request them as needed.  This saves you the expense of unnecessary inspections costs.  However you can always request any inspection at any time if you have a concern. ( Initial at the bottom )
  • Page 5 - Paragraph F indicates that you reserve the right to request (negotiate) with the Seller for repairs after the Home Inspector's Report and/or Appraiser's Report comes back. Paragraph G lists any Seller contributions towards your closing costs that you are asking for.  This reduces the "Net" offer to the seller but can help you finance your closing costs at a low interest rate.  This is a term you only want to include in a non-competitive property, as it weakens your offer. Make sure you have reviewed your estimated loan closing costs with you lender prior to signing the offer.  Paragraph H is specifying whether you want a Home Warranty or not.  A HOME WARRANTY is not insurance - you pay a deductible for each repair request for certain items that are covered.  When requesting the seller to pay for it, you can limit or eliminate your cost for the annual premium for the first year.  Make sure you read and understand your Home Warranty coverages prior to closing.  ( Initial at the bottom ) 
  • Page 6 - Paragraph 11-A specifies how long you have to complete your DUE DILIGENCE period.  Within this period you can cancel the purchase agreement without penalty.  ( Initial at the bottom )
  • Page 7 - Paragraph 17 indicates you will Mediate before Litigating if you and the Seller have a dispute.    ( Initial at Paragraph 17-A and at the Bottom ) 
  • Page 8 - The limit of your liability to the Seller is the EARNEST MONEY Deposit (if you default on the contract).  ( Initial Paragraph 17-C and at the bottom ) 
  • Page 9 - Definitions and terms  ( Initial at the bottom ) 
  • Page 10 - Additional terms if applicable  ( Initial at the bottom ) 
  • Page 11 - Specifies who represents who.   ( Sign/Date/Time and Initial at the bottom ) 
  • Page 12 -  ( Initial at the bottom )