Blog Post – Purchase Contracts 101

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The mystery of the brown M&Ms…and other things you need to know about a home purchase contract

During the 1980s a famous rock band had an unusual request as part of their performance agreement. Their contract stipulated that prior to each live performance, the band must be provided a bowl of M&M candies in the backstage area but that all brown M&Ms would have to be removed from the bowl. If even one solitary brown M&M was found in the bowl, it gave the band legal ground to cancel their performance, even at the very last minute. When this strange request became public knowledge, the story became a symbol of the ridiculous nature of the so-called rock and roll lifestyle. But the truth is there may have been more to the story.

This band’s performance contract was a massive document, filled with specifications about how equipment would be handled, how the stage would be set up, even how much voltage would be required for their amplification systems. If aspects of this contract were ignored, the band and audience’s personal safety could be at risk. When the band arrived at a venue prior to their performance, how could they be sure that these important requests in their contract had been carried out? By looking at that bowl of M&Ms. If there were brown M&Ms in the bowl, then chances were that other, potentially much more important aspects of their contract were being ignored. It was a red flag, or in this case, a brown flag.

When preparing to purchase a home, completing and understanding the terms of the contract may seem daunting. Homebuyers often have some trepidation that they will miss important details that may cost them more in the end than they bargained for. So what are some helpful tips for homebuyers who are ready to start the contract process?

Know who pays for what. It’s important to know who has the responsibility to pay for such items as Escrow Fees, Document Recording Charges, Home Warranty, HOA Transfer Fees and many other types of items. Whether these items are the responsibility of the Buyer, the Seller, or shared between both is something that changes from county to county. Your Real Estate Agent can aid you in finding out what the standards are for these types of items in the county in which you are looking to purchase a home. Once you are familiar with these details you will be equipped with the knowledge you need to…

Negotiate, Negotiate, Negotiate. While it is natural for a Homebuyer to be concerned first and foremost with the sales price of the home they want to buy, there are many other aspects of a real estate purchase contract that need to be considered. You may like the price of the home, but if you are also paying for much of the inspections, recording fees and transfer taxes, does the bottom line price still meet your expectations? Many of these associated fees can and should be negotiated between the Buyer and Seller. Once again, working with a knowledgeable Real Estate Agent is invaluable in the negotiating process.

Be aware of contingency timelines. A contingency is a contract provision that allows for the cancelling of the purchase agreement should certain conditions not be met. Contingencies are a protection for both the Buyer and the Seller and are an important part of contract negotiations. It should be noted, though, that these conditions often come with a time frame attached to them. To protect your earnest money deposit and keep your purchase agreement valid, always be aware of the deadlines for fulfilling contingencies.

You may not have to go to the lengths that the members of the rock band mentioned at the outset did to ensure that your Real Estate contract meets your expectations. But you also don’t have to rely on luck when you are ready to buy a home. Armed with a little knowledge, you can be confident that the process of completing your home purchase contract will meet with success!

Photo credit: Quinn.Anya