What are the key provisions of the purchase contract?
A purchase contract, in most cases, is a standard form contract with certain riders, if necessary, attached. The contract can have many provisions, but should at least include the following items:
The date of the contract.
The purchase price of the home.
The amount of the down payment, who is holding it, and the escrow terms if it is in escrow;
all items of personal property to be included in the sale, such as wall-to-wall carpeting, window treatments, appliances, or lighting fixtures.
Any items to be excluded from the sale, such as an heirloom chandelier.
The date when the deed will be transferred (or the closing date).
A mortgage-contingency clause if the buyer intends to apply for a loan. This states that the buyer intends to obtain a loan in a specified amount at a specified interest rate within a specified period of time. If the buyer is unable to obtain financing, the buyer may be released from her or his obligation. The seller usually allows the buyer thirty to sixty days to obtain a loan commitment.
An inspection contingency clause. This allows the buyer to have the home inspected, usually within five to ten days of the date of the contract. If the inspection is unsatisfactory, the buyer can terminate the contract. However, the buyer may not be released if the contract allows the seller to make repairs and the repairs, when made, meet applicable standards of workmanship.
A lawyer-approval contingency for both the buyer and the seller if either or both parties are signing the contract before it is reviewed by their respective lawyers.
A legal description and the common address of the property.
A provision that the seller will provide good title to the home, or what is sometimes called marketable title. Generally, the seller fulfills this obligation by providing an abstract of title, a certificate of title, or a title insurance policy. This indicates that the seller has the authority to sell the home. In some states--for example, Connecticut --the seller is required to deliver good title, which the buyer is expected to verify, at his or her own expense, by securing an abstract of title, a certificate of title, or a title insurance policy. If the buyer encounters problems in establishing title, he or she can reject the title at or before closing.
Any restrictions or limitations that could affect title.
A provision for paying utility bills, property taxes, and similar expenses through the closing date.
A provision for the return of the buyer's earnest money deposit if the sale is not completed--as, for example, when the buyer has been unable to obtain financing after reasonable or good-faith efforts to do so.
A provision for taking possession. Along with a firm date for transferring possession from the seller to the buyer, the buyer should include a provision that requires the seller to pay a specific amount of rent per day if the seller does not leave the home by the agreed date. If the buyer and the seller already know that possession will be delayed, the buyer may ask for a certain amount of money to be held in escrow to cover the rent for the expected time period, and for possible damage to the property during the seller's post-closing possession period. The agreement should also specify who is responsible for insurance, repairs, and the risk of injury between closing and the date that the seller delivers possession.
A provision for a walk-through inspection within a specified period before the date of closing to allow the buyer to make sure conditions are as they should be according to the contract.
A provision for who is responsible for maintaining insurance until the closing. The Uniform Vendor-Purchaser Risk of Loss Act applies in some states, which means that the seller assumes the risk of loss until either the transfer of title or possession. In some states, the common law requires the seller to assume this risk.
The allocation of closing costs, and apportionment of taxes, fuel oil, homeowner's association dues, common charges, and any other items prepaid by the seller that will benefit the buyer.
Disclosures required by state or federal law.
Signatures of the parties.
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