How to Read a Property Purchase Agreement Like a Pro
Buying property can be a time consuming and stressful task. However, with the right knowledge of all the legal terms in purchase agreements, you can go through it in the blink of an eye. As a novice investor, you have to be aware of what is essential to look at in a property sale agreement. Ravi Goenka, an advocate at Goenka Law Associates, warns that the property purchase agreement is a contract that highlights a lot of crucial decisions you have to consider to close the deal, including timing, price, and conditions.
A purchase agreement has to identify the buyer and seller in writing. Information on the address, tax identification, and lot number of the home are also included in this section. At times, the term owner of record is included to indicate the seller of property. Both seller and buyer have to sign the document to validate the agreement.
This part describes every detail of the subject property. It includes all outdoor features, such as swimming pools and boundaries, as well as easements. At times, the property being sold may be in bad shape, but the owner does not want to spend money on repairs. Here, the property is described on a ‘as is or where is’ basis. It excludes the seller from the responsibility of any damages. If the subject property is leased out, the agreement ought to indicate the lease details to prevent complications after the change in ownership. It is essential to look for the person entitled to receive rent in the lease clause because, at times, an agreement may show that the vendor would receive all incomes until the lease expires.
Title and Deed Section
Ensure that clear ownership of the title has been described. The seller should have a title insurance policy whereby the insurance providers perform a title search to identify any burdens or liens on the property. The deed section also explains that ownership rights will be transferred to the buyer after completing certain conditions.
Purchasing a mortgaged house is problematic because it often involves a third party. The agreement ought to make a detailed description of how the loan will be settled and by whom. The buyer may take over the loan, or the seller can use the sale earnings to complete the payments. A home loan, however, is not transferable. Thus, buyers have to submit their documents and income.
Fixtures and Personal Property
Commonly referred to as the ‘What Stays’ clause, it depicts items such as faucets, carpeting, furnace, outdoor plants, and other ‘permanent’ fixtures that must remain in the home unless otherwise stated in the contract.
The price section indicates the agreed-on price of the property. Other payments also appear here, including down payment, mortgage terms, installments, due taxes, earnest money, and possession date. Ensure that you understand all these terms and agree to them before you sign.
This section notes the date which both parties must sign the contract for it to be legally binding.
Addenda are any other attached documents, usually a sheet of paper attached to the agreement. It defines issues not addressed in the contract to sell or further define terms.
Keep these pointers at your fingertips, and you will be way ahead of the curve when it comes to signing the contracts.