If you’re a Fayetteville rental property investor, you understand that getting a property is a huge part of expanding your portfolio. To purchase confidently, it’s essential to thoroughly understand the real estate purchase contract. A standard real estate purchase contract is a document that clears out the terms and conditions of the sale between the buyer and seller. This blog post will mention the most significant sections of a real estate purchase contract that every investor needs to know!
Earnest Money Deposit
The earnest money deposit is generally anywhere from 1 percent of the purchase price to 3 or 4 percent of the purchase price. It’s an amount you put in escrow when you submit your offer that indicates to the seller that you are serious about buying the property. The earnest money deposit will be applied to the purchase price at closing.
Offer to Purchase
The Offer to Purchase section begins with a detailed description of the property. This description should be checked seriously to secure that it contains the correct property details for which you are bidding. This description will additionally perhaps involve a list of items included with the sale and items to be excluded from the sale. It’s equally important to pay close attention to these lists, as the seller can exclude just about anything from the sale.
Purchase Price
The purchase price section of the real estate purchase contract is one of the most important sections. In this section, you will agree to pay the amount indicated in the agreement to acquire property ownership. Additionally, it’s vital to note any additional fees or costs involved with the sale, like the seller paying for closing costs. This section will similarly define how you plan to pay for the property, whether through financing or not, and the amount of cash you plan to bring at settlement.
Seller Disclosures
The seller disclosures section shows any known issues with the property, whether physical or legal. This consists of things, namely, any outstanding lawsuits involving the property, environmental concerns, or the need for a new roof. As a general rule, you should take into account this information when making an offer. If the seller fails to disclose any known issues and you discover them after your closing, the seller could be liable for damages.
Contingencies
Another significant section of a real estate purchase contract is the contingency section. This specifies all the conditions that must be met just before closing, for example, obtaining financing, procuring an inspection, and having a clear title. These contingencies are most commonly automatically waived if the buyer fails to act on them. But really, it’s vital to assess these contingencies still so that you get and understand what to expect in the process and how long you have to meet those requirements.
Inspection Period
The inspection period is a span of time after you submit the offer that allows you to cancel the purchase contract for any number of reasons. As an illustration, you may detect a huge defect with the property and choose not to procure it. Or, you may have buyer’s remorse. The inspection period enables you to cancel the contract without consequences if you catch something that wasn’t in your initial inspection.
Assessments and Financial Obligations
This section is related to any current or future assessments and the financial obligations associated with them. If a large, major project has been proposed for an area where the property is located, this section will outline the proposed project and any associated costs. It may list and include any outstanding fees you will be responsible for at closing, such as property taxes, HOA fees, special assessments, or utility bills. It’s essential to check this information thoroughly to see any financial obligations you may be taking on as a result of the purchase.
Closing and Settlement
This section of the real estate purchase contract details when and where you will settle on the sale. This mostly involves an anticipated date for property transfer. Even while lots of buyers believe they can take possession of a property at closing, that isn’t, in fact, always the case. That’s exactly why it’s significant to examine the closing section of your contract meticulously so that you can prevent any unforeseen timing troubles.
Offer and Time for Acceptance
One of the final parts of a real estate contract will usually include important dates you should watch closely, as well as the offer’s expiration date and time and contract deadlines. A real estate purchase contract is only valid if the seller accepts your offer. The offer and time for acceptance section set out how long you have to make your offer, how long the seller has to accept it, and when the buyer’s responsibility for bestowing a deposit commences. Furthermore, this section may cover when the contingencies kick off and how long you have to meet these terms.
Acceptance/Counteroffer/Rejection
Once you have studied the real estate purchase contract and are ready to submit your offer, you must show acceptance or rejection by signing the bottom of the contract. If the seller accepts your offer, the purchase agreement becomes legally binding, and you must go on with the transaction according to the terms drafted in the contract.
Nevertheless, if the seller decides on making a counteroffer, which is their response to your initial offer, then this paragraph will be stated your purchase agreement. The seller’s counteroffer may entail different terms or suggest a revised purchase price. If you accept the counteroffer, then you must sign and return it to indicate your acceptance. However, if you do not like to carry on with the transaction as laid out in the seller’s counteroffer, then it is regarded as a rejection of the contract. You should always ensure to seriously review the terms of your agreement before signing, as this will make it certain that you grasp well what you are agreeing to and avoid any misunderstandings.
Now that you’ve learned about some of the major sections of a real estate purchase contract, you’ll be geared up with the helpful knowledge of how to buy rental property with confidence! Certainly, having a rental market expert on hand to assist you through some of the more complex details of purchasing an investment property can be exceedingly beneficial. Real Property Management SuiteLife can support you in every step of the operation, from the initial purchase to ongoing Fayetteville property management. To learn more about our services and what we expertly offer our investors, contact us online today.
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