Components of the Contract

AKA the Contract to Purchase.

Longer and More Involved...
A look at what is entailed.

The Contract to Purchase is four times as long as the Offer to Purchase. It covers points in more detail than the offer. You should always read the Contract to Purchase carefully to be sure you agree with all the clauses and points within it.

Here is a glimpse at what the actual contract includes:

• Names of both Parties.
  
  
• The address, title reference, and description of the property.
  
  
• A general list of buildings, structures, improvements and fixtures that are included in the sale. This list should include appliances (washers, dryers, etc.) and new carpet or a paint job.
  
  Note: Smaller items and personal items, such as window treatments, lawn mowers, etc. should not be included in the main contract. Your lender will only cover real estate property, not personal property.
  
  
• Title Deed with notations about any restrictions, easements (rights of others to use your property or a part of it), and other rights or obligations.
  
  
• Approved plans that have been recorded in advance with the seller. This should include a clear transfer to the buyer.
  
  
• If your state requires it, be sure to get a registered title.
  
  
• Provide the amount you will pay and spell out the amount you will pay as the deposit, the escrow, and the remainder for the settlement.
  
  
• A clear statement of the escrow agreement and who should receive interest from the account. This should also include a buyer's default that states that the buyer gets the escrow account should the sale not go through as planned.
  
  
• Time and date of the closing. You should also include the place for the closing.
  
  
• A clause stating that you will take over possession of the property without any tenants or occupants, and that you will have the opportunity to inspect the property prior to closing.
  
  
• A clause stating that the seller will have 30 days to clear up any problems that occur with the title.
  
  
• An agreement for you, the buyer, to accept the title of the property even if something impairs it. This means that if there is a lien of any kind, you can still take the property and deduct the amount of the lien from the purchase price. Or the seller may leave money on the table to compensate the buyer for the lien amount. If there is a natural disaster or fire, you can take the property and be compensated from the insurance money.
  
  
• The seller should agree to maintain a certain level of insurance (usually negotiated between parties) to cover the cost of repair should something happen to the property, such as fire or other disaster.
  
  
• A clause stating that you will accept the Deed once the seller has met all the duties and obligations of the contract.
  
  
• A list of expenses, like water or electricity, that must be prorated for the portion of the month the seller used the home prior to closing. You will be credited these amounts at closing.
  
  
• An estimate of unassessed or abated taxes for the year. These will be based on last year's taxes.
  
  
• A formula for calculating the brokers' commissions and the amount.
  
  
• The names of the brokers and warrants that they are licensed.
  
  
• A statement that the brokers are part of the contract.
  
  
• A spousal release, unless the party is divorced or widowed, means that the spouse gives up any rights to the property.
  
  
• A description of any warranties or promises the seller makes to the buyer about the condition of the property.
  
  
• All contingency clauses (see section on contingencies below).
  
  
• Legal statements that establish the contract as a legal and binding document.
  
  
• Any mention of federal or local regulations that are required in real estate contracts in your area. This may include such things as a lead paint statement.
  
  
• A place for additional riders.

Every Contract Is Different

Be sure to make sure yours fits your particular situation. Every contract will vary depending on your jurisdiction, the type of property you are purchasing and the parties involved. Be sure that you understand everything that is included in your contract, and that it is complete. Remember, if it is not spelled out in the contract, it legally doesn't exist.

Negotiating the Contract

Do you know how? Keep going and we'll give you some hints.

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