Other Considerations and Contingencies
Of course, beyond those required items, you can include a number of other things in the purchase contract. Some of the most common clauses are discussed here. You may want to add some of these to the bare-bones contract.
If you are going to have to borrow money to buy the property in question and you have not already been approved for a loan, your contract should be subject to your being able to secure a mortgage. Then, if you can't get the money, you are legally released from your contract to purchase and you will get all of your earnest money back.
The phrase might be written as follows:
subject to a first mortgage in the amount of for a term of years at an interest rate no higher than .
It is important that the length of the term of the mortgage and the maximum interest rate that you want (what you can afford) be spelled out in the contract. If your contract just states mortgage in the amount of $90,000 and the bank turns you down, the seller or someone else could offer to give you a mortgage loan of $90,000 for five years at 18 percent. You would be legally committed to accept it and buy the property (which, of course, you couldn't do) or lose your deposit money. True, this is not likely to happen when dealing with honest people, but not all people are reputable. It is safest to include in the contract that it's subject to your being granted a mortgage at the currently prevailing interest rate.
The mortgage contingency clause should also have a cutoff date. Allow yourself plenty of time to get a commitment from a lender.
A nice feature to offer buyers when you are selling a home is a home warranty. Home warranties can be purchased for less than $400 and will cover all mechanical systems and appliances in the home. For a buyer, this offers great security. For the seller, it eliminates worrisome inspections and more postcontract negotiations. The buyer will have to pay a small deductible for repairs if they arise, but will avoid the cost of replacing a hot water heater, stove, or other potentially expensive appliance.
You will probably want to have the house inspected for termites. In some parts of the country, and especially with attached housing, a termite bond must be shown at the closing, showing the house is treated annually to prevent those pests. Sometimes this is the seller's responsibility, but if it is not required by law, you will want to pay for an inspection yourself.
A termite contingency in the contract can allow you to withdraw your offer to buy if there is significant termite damage, or you can negotiate with the seller for those repairs.
You also may want your contract subject to an assurance that the plumbing, heating/cooling, electrical systems, and appliances are in working order and that the house is structurally sound. You can negotiate over who pays for a professional inspection, but most buyers prefer to pay for this themselves to be sure the inspector is working for them and not the seller. You can also negotiate over any repairs the inspector finds necessary.
You probably want the house free for you to move into immediately after closing, if that is your choice. If sellers are delayed in leaving for some reason, they often pay a per diem rent to the new owners for the time they stay in that property. Your lawyer can work out those details for you.
Whether you can have an entire two- or three-family home delivered vacant depends on the rent laws in that community and on how they protect renters with a lease. It's possible that only the unit you will live in yourself will be delivered empty.
If you already have a home and it is for sale, you might want a clause in the contract making the purchase subject to the sale of your current home. However, this is a point not all sellers will agree to, unless perhaps it is a very slow sellers' market or the sellers are in no particular hurry to move.
You will want a clause in your contract stating the seller provides a title that is free and clear of clouds on the title. If real-estate taxes have not been paid by the owner, then a tax lien may appear on the title. If work was completed to improve the property and the contractor was not paid, they have the right to lien the property. If the seller once entered into a contract to sell the property to another party and backed out of the sale, and the buyer sued the seller for specific performance, then this suit would appear on the title. All of these things are clouds on the title and you need to know about them if they exist.
You can negotiate over who pays for the title search, and of course, you can negotiate to accept some or all of the clouds on the title.
Your lawyer will tell you that everything that is not nailed down (attached to the building) is personal property, not real estate. This is true, but some sellers think nothing of pulling out built-in (and, therefore, attached) dishwashers and detaching and removing all the lighting fixtures the day before the closing.
The best contracts will have a personal property addendum attached. On this sheet of paper, everything that even vaguely resembles personal property or anything about which there might be a question is listed under one of two headings: “Included in the sale” and “Not included in the sale.” Both the buyer and seller should sign that page. The list can include everything from appliances to light fixtures to blinds in the windows.
If you are buying into a community with such an association, you will want to be sure you can live with the homeowners' association regulations before you agree to purchase that home. Be sure to get those covenants from the seller or real-estate agent, if they have not already been offered to you.
A good contract will provide that the buyer be allowed to inspect the property on the day of the closing, before the title transfer takes place. Everything should be as it was promised, with no unpleasant surprises.
It is smart to include this clause even if you are not sure you can personally make it to this inspection. Maybe you can have a friend or relative look through the property for you. Just the possibility that there will be a walkthrough is often enough to keep many sellers a little more honest.
Closing costs are negotiable, too, as is so much in real estate. Who pays for what is up to both you and the seller, although some costs are traditionally the buyers'. Just remember that common practice is not law — tradition can be broken, everything is negotiable. After you've negotiated, specify in the contract who pays for what.
Adding a clause about liability and maintenance means the seller promises you will receive the property in essentially the same condition it was in when you signed the contract. If a storm later causes a tree to fall against the roof before the closing, repairs must be made by the seller. Your lawyer might also add a line to this clause that reads something like, “Seller agrees to cut grass, maintain landscaping, and provide for snow removal until closing, and to deliver the premises in question in broom-clean condition.” That latter phrase can spare you from having to spend days hauling junk out of your new home before you can even move in.
Remember two points about the contract: First, as you have read often in these pages, everything is negotiable. Second, if it is not in writing, it is not enforceable — by either side.
If you are using a lawyer to handle the sale for you, include a clause allowing your attorney to review the property, noting that review will take place within three to five business days of the date of the contract.
