Read the Fine Print

Your purchase or sale of a home is complete except for signing a bunch of papers. Don’t relax yet – many real estate transactions fall apart at the last second due to mistakes in the contract. A recent Realty Times article discusses potential contract hazards and strategies for avoiding them.

You have found your dream home or connected with a buyer for your home for sale, but the transaction falls to pieces right before closing. How heartbreaking! Transactions dissolving at the last minute are often due to some small detail being overlooked.

This is easy to imagine when you look at a typical real estate contract. Many are incredibly lengthy, with a lot of small print. Although you or your Realtor may be tempted to skip over the details, keep in mind that contracts are costly and legally binding. You want to ensure that your contract is enforceable and locks both buyer and seller into an agreement to close the deal. Problems arise when one party finds a loophole or one party misses a signature or deadline.

In writing of the contract, you and your representative should be careful to understand what the contract does and does not mean. Contracts can vary in terms of protection or liability offered to buyers and sellers. Make sure that your agent is very clear on your expectations and desires.

Once the buyer and seller come to an agreement over price, the work isn’t over. All of the terms written out in the contract have to be met. For instance, if the contract says that you will have a lender approval letter in two days, you have to do that. If you do not meet that requirement, you may be in default. Another good example is the home inspection clause. Usually, this clause says the home inspection will be conducted in X days and is then followed by three more blanks to fill in dates. In essence, this one paragraph gives the buyer of the home a defined number of days to conduct the inspection and get a report with their defect list. The seller then has a certain number of days to respond to the list of defects, including what he or she is going to do to remedy them. This part of the contract is followed by yet another set of dates for the buyer to respond to the seller’s remedy offer and then, finally, one more set of dates for the seller to respond to the buyer’s response. Confusing, isn’t it?

It can take up to two weeks to complete all of the requirements in this one paragraph! You can see how if the buyer or seller violates one small part of this agreement, the whole deal could fall apart or be sidetracked. For example, if the seller refuses to fix any of the buyer’s demands, the buyer can then step away from the deal with his or her deposit check and find another property. On the other hand, if the buyer is stuck on the property, he or she could agree to move forward, keeping the contract in place and moving toward closing as planned. But, the buyer must be clear that he or she is satisfied with the seller not fixing any defects and that he or she is moving forward with the transaction. This must be completed in writing.

This is just one small paragraph that has deadlines, initials, signatures and actions required. If you, your agent, the other party or his or her agent is in a rush to get the transaction completed, you are at risk of missing an important step. As you are reviewing the contract, be sure your agent takes the time to explain what you are signing and what recourse you have if the other party defaults and what it means if you default. You will save yourself a painful headache down the line if you take the proper steps at the front end!

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