Before getting your dream home, it always starts with a real estate purchase contract. These are legally binding agreements that are signed by home buyers and sellers to indicate that they both agree upon the terms and conditions of the contract, like the purchase price, closing date, and more. It’s important that you understand what you are getting into before signing the contract if you want to buy your Manhattan property. As a buyer, you must be familiar with the terms used. Although legal professionals will explain everything to you, it’s also necessary and practical to know it yourself. That’s why here are some relevant terms you might see in a regular purchase contract.
You should know what is earnest money.
Before you agree to sign the contract, you need to check the home’s purchase price first and earnest money. You have to pay money immediately before purchasing the Manhattan property, and it comes in the form of an earnest money deposit. This is an indication to the seller that as a buyer, you are committed to completing the transaction. The earnest money deposit is negotiable between the parties. Frequently, it is about 1% to 2% of the purchase price. So, once an offer is accepted, the money would be usually held by the seller’s broker to be used as a credit for your down payment and closing costs. Knowing the meaning of earnest money is relevant because you can make your bid stand out in an aggressive seller’s market.
You should check if it has a contingency.
Some purchase contracts might contain contingencies. This means that there is something that you’ll have to do as a buyer for the process to go forward. Examples of a contingency are home appraisals, mortgage approvals, and home inspections. You need to understand contingencies because they can help protect you by giving you the capability to back out of the sale if something happens. Although, you should keep in mind that all contingencies have deadlines that must be met.
You should be aware of the settlement date.
A settlement date or closing date is the day when all of the involved parties meet so that you can make the sale for the Manhattan property official. You should select a settlement date that will give you enough time to complete contingencies like home inspection, appraisal, and more. This is because if you don’t fulfill your obligations to the purchase contract when the settlement date arrives, you could be considered “in default.” You can even potentially lose your deposit. That’s why buyers and sellers should negotiate a mutually agreeable settlement date.
You should take note of escrow.
Escrow pertains to a secure holding area where things like your earnest money check are kept safe until the deal is closed, and you are officially in possession of your house. The escrow holders vary, but they could be the closing company, an attorney, or title company agent. Also, the purchase real estate contract will state whether the buyer or seller, or both will pay for the escrow. The fee costs about 1% to 2% of the cost of the property. Remember that if you also back out of the deal without any legitimate reason, you’ll be forfeiting your portion of the escrow money to the seller.
You should take note of the form of delivery.
In order for purchase contracts to be perfected, there must be “delivery.” Delivery can come in many ways, and buyers and sellers must agree on what accepted form of communication it shall be. During the transaction, you can have methods of communication, such as email, to receive important documents. Your agent will then have to abide by the terms of delivery when communicating with the seller or listing agent. This is because if the necessary documents are not delivered properly, it can result in delay and, in worst-case scenarios, a void contract.
Thus, make sure to understand all of these essential terms when signing a purchase contract. You should be careful and avoid mindlessly signing legally binding documents. You don’t want to be obligated to a contract that you don’t even agree with. That’s why it is also advisable to get the help of a lawyer or a real estate professional before signing any significant agreements. Don’t rush into buying your Manhattan property, and make wise and informed decisions.
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