Checklist: Contract Terms and Clauses Elk River MN

When a purchase contract is set before us, many of us may find our eyes glazing over. While the prospect of combing through a contract may be unappealing, there are key points everyone should be sure to understand. Here are some common terms and clauses in a purchase contract. Clarify with your REALTOR® if there is anything you don’t understand.

• Name of buyer(s) and seller(s). It seems obvious, doesn’t it? If you are the buyer, make sure to fill in your name as you would like it to appear on the deed. If there is more than one buyer, list the names of all co-buyers.
• Legal description of the property. Make sure the description is specific, particularly regarding city limits, school districts and rural properties, and includes any relevant zoning information, as well.
• Down payment or deposit information. Often, a buyer will offer a deposit (usually $1,000 or one percent of the purchase price) with an offer. This amount should be held in escrow (by an attorney or a REALTOR®’s trust account) until all conditions of the contract have been met.
• Purchase price. Both parties will negotiate the amount until an agreement is reached. The contract should list the final agreed-upon price, as well as the exact terms of sale.
• Closing date. This is the date the deed will change hands. If you are the buyer, it is the date the home will officially become yours. If you are the seller, you will need to move out by this date.
• Personal property included in the sale. This includes any appliances, furniture or other items included in the contract. Include a detailed description of all personal property items, including the make and model of any appliances.
• Disclosure of defects and lead paint disclosure. Some states, such as California and Maine, require the seller to disclose any known defects about the property in writing. If the house was built before 1978, the seller is required to include a lead-based paint disclosure as part of the contract. If the property was built after 1978, this disclosure becomes optional.
• Contingencies. If the sale is dependent on the buyer’s mortgage financing, the details of the financing should be included in the contract. The buyer can even list things such as expected interest rate and mortgage terms.
• Inspections. An acceptable property inspection should be a condition of sale. If there are other, specialized inspections to be conducted (such as a termite inspection), they should be listed here as well. Include a clause that indicates who takes on the cost of repairing problems found during the inspection process -- the seller usually assumes the cost of major repairs.
• Home warranties. If a home warranty has been purchased, information should be included in the contract.
• Title insurance. Information about title insurance should be listed in the contract. There should also be a clause identifying how to handle potential problems that arise during the title search.
• Commission information. The contract should stipulate who pays the agent’s commission and how much gets paid.
• General contingency clauses. Some contracts include a general clause that allows the buyer a few days to review the agreement with an attorney or other professional.
• Signature. This is the famous dotted line. Both the buyer and seller should sign only when they are comfortable with all terms in the contract.