The contract document
The following notes relate to buying a privately owned re-sale home. Buying new construction is different.
When you are ready to make a formal offer, your agent will set this out on a standard contract form, which will go to the seller for their consideration when it is completed and signed by the buyer. There are several clauses in the contract document that the buyer needs to consider when making an offer in addition the asking price. The following numbers refer to the line numbers in the most commonly used contract, the FAR/BAR As-Is Contract for Sale and Purchase.
Line 2 should contain the names of the buyer(s) exactly as they will appear on the title deed. Make sure the spelling is correct!
Line 20 may include a reference to any furniture, furnishings and housewares that are to be included in the sale, but these may appear separately in an addendum.
Line 26 is the offer price, and line 27 is the amount of good faith deposit offered by the buyer. The rest of this section is filled as appropriate, depending on whether a mortgage is to be obtained. Line 32, an additional escrow deposit, is seldom used.
Line 45 defines the time allowed for acceptance or a counter-offer. If either or both parties are overseas, then a more generous timescale should be set.
Line 52 sets the timescale of the contract and the closing date of the transaction. This should be discussed with the buyer's agent to make sure enough time is allowed to close, especially if financing is required. After the date entered here the contract becomes void unless it is extended in writing by both parties.
Line 81, the financing contingency clause, should be discussed with the buyer's agent to make sure that it is completed in such a way that it protects the buyer in the case of a failure to obtain acceptable financing.
Line 158, it is usual for the seller to provide and pay for title insurance. This gives the seller the right to choose the title company that will hold the escrow deposit and handle the closing.
Line 173 allows the buyer to request that the seller provide and pay for a home warranty to cover unexpected expenses in the first year after purchase. The seller may of course decline to accept this, in which case the buyer may want to pay for this himself.
Line 248 details the inspection contingency, and states the number of days during which the contingency will be in place.
Line 568 allows for specific documents to be appended to the contract, including a homeowners or condominium association declaration.
Line 571 may be used to add any special clauses, such as a requirement for the seller to pay some or all of the buyer's closing costs, or to include advance rental bookings in the transaction. Alternatively, these may appear separately in an addendum.
Finally, don't pass over the small print. There is a lot of important information in these sections that the buyer needs to be aware of before signing the contract. When you are sure that you understand and agree with everything, that is the time to put your signature(s) to the contract.