If you are planning to buy a home, the first thing you will probably do is to look up realtors in Fargo ND. While working with a real estate agent makes the home buying process hassle-free to some extent, you shouldn’t enter the market without educating yourself a little bit.
One of the most important things you should be familiar with when buying a home is the purchase contract. It’s a legally binding document, so you need to know what you are getting into when you sign one. It will also make your agent’s job a lot easier because he or she will be able to explain to you your legal and financial obligations.
Here are some of the most important contract terms you need to be familiar with:
Earnest money deposit or good faith money
An earnest money deposit is sort of a commitment that you make after deciding to purchase a particular home. You make the deposit at the time of signing a purchase contract. It’s usually up to 2 percent of the sales price. The amount is held in escrow by a third-party escrow company or trust. If you back out from the deal without any legitimate reason outlined in the contract, you will forfeit this amount and if the deal comes through, this amount will be applied toward closing costs.
Due diligence period
After signing the purchase contract, you will have a specific number of days to conduct home inspection, get your lender to perform an appraisal and verify the title and other documents. This is called ‘due diligence period’.
You are entitled to have the home you are buying inspected by a professional home inspector. If you find defects not disclosed by the seller you have three options: 1. You can purchase the home ‘as-is’, 2. You can ask the seller to make repairs or 3. You can back out from the deal.
If you have applied for a mortgage, your lender will want to appraise the market value of the property. The lender will order an appraisal by a licensed appraiser. The appraised value will be taken into consideration when the lender determines the amount of mortgage that can be approved for that particular property.
You will write ‘contingency clauses’ into the purchase contract. The deal will be contingent upon these ‘conditions’. For example, a home inspection contingency clause enables you to back out of the contract if you find defects with the property not disclosed by the seller. Financing and appraisal are other common types of contingencies included in a contract.
When buying a home, you will want to make sure that there are no judgements or liens on its title that may affect the seller’s right to transfer the title to you. A title inspector or agency can perform a title search on your behalf.
The closing day is when the funds are transferred to the seller and the title is recorded in your name. On the closing day, you get the keys to your home!
A purchase contract contains important terms and condition for the biggest purchase of your life. A property transaction process is so complex that things go wrong all the time. The contract will protect you legally and financially in case the deal falls through. You can find a lot of information online about legal and financial terms most commonly used in a purchase contract and educate yourself.