If you’re a Knoxville rental property investor, you are mindful that buying a property is a significant component of growing your portfolio. It is necessary to thoroughly understand the real estate purchase contract to make a purchase with confidence. A standard real estate purchase contract is an agreement that outlines the terms and conditions of the sale between the buyer and seller. Within the scope of this blog post, we will be discussing the most essential sections of a real estate purchase contract that every investor must understand!
Earnest Money Deposit
The earnest money deposit is generally anywhere from 1% of the purchase price to 3% or 4% of the purchase price. It’s an amount you put in escrow when you make an offer; it shows the seller that you are committed to buying the property. The earnest money deposit will be applied to the purchase price at closing.
Offer to Purchase
The Offer to Purchase section starts with a detailed description of the property. This description should be studied thoroughly to guarantee it contains the correct property details for which you are bidding for.
Moreover, it will most likely contain a list of items included in the sale and items to be excluded from the sale. Because the seller might exclude practically everything from the sale, it is equally important to pay great attention to these listings.
Purchase Price
The purchase price section of the real estate purchase contract is one of the most essential parts. In this section, you will agree to pay the amount specified in the agreement to acquire property ownership.
Also, make note of any additional fees or costs linked to the sale, such as the seller paying for closing costs. This area will also explain how you plan to pay for the property, whether through financing or not, and the amount of cash you expect to bring at settlement.
Seller Disclosures
The seller disclosures section addresses any known issues with the property, whether physical or legal. This involves any outstanding lawsuits such as the property, environmental concerns, or the necessity for a new roof.
If you want to make an offer, you should usually think about this. The seller could be liable for damages if the seller fails to disclose any known issues and notices them after closing.
Contingencies
Another vital section of a real estate purchase contract is the contingency section. This states all the conditions that must be met before settlement, such as acquiring financing, getting an inspection, and having a clear title.
These contingencies are usually automatically waived if the buyer does nothing. If you want to know what you can anticipate and how much time you have to complete the process, reviewing these contingencies is a must.
Inspection Period
The inspection period is the duration after you submit the offer, during which you can cancel the purchase contract for a number of reasons. As an illustration, you may notice a significant defect with the property and choose not to get it, or you may have buyer’s remorse.
If you discover anything within the inspection period that was not apparent during the initial inspection, you are free to cancel the contract without incurring any penalties.
Assessments and Financial Obligations
The current and future assessments and their financial obligations are detailed in this section. If a major project is proposed for the area where the property is located, this section will describe the project and any associated costs.
Property taxes, HOA fees, special assessments, or utility bills are all examples of outstanding fees that could be due at closing. Please read this document thoroughly so that you are aware of any potential financial obligations that may arise due to the purchase.
Closing and Settlement
Here in the real estate purchase contract, you will find the specifics on the settlement date and location. In most cases, this includes an anticipated date for property transfer. A common misconception among buyers is that they can actually gain possession of a property at closing. Due to this, it’s critical to review the closing section of your contract carefully so that you can prevent any unforeseen timing issues.
Offer and Time for Acceptance
You should pay special attention to the offer’s expiration date and time as well as contract deadlines, which are usually included in one of the last sections of a real estate contract. A real estate purchase contract is only effective if the seller accepts your offer. The offer and time for acceptance section states how long you have to make your offer, how long the seller has to take it, and when the buyer’s responsibility for providing a deposit begins. Moreover, this section may include when the contingencies start and how long you must meet these terms.
Acceptance/Counteroffer/Rejection
Once you have reviewed the real estate purchase contract and are prepared to make an offer, you need to indicate acceptance or rejection by signing the bottom. If the seller accepts your offer, the purchase agreement becomes legally binding, and you should carry out the transaction as stated by the terms outlined in the contract.
However, if the seller decides to make a counteroffer, which is their answer to your first proposal, this paragraph will be a part of your purchase agreement. The seller may propose a revised purchase price or offer alternative conditions in their counteroffer. If you accept the counteroffer, you are required to sign and return it to indicate acceptance.
Some of the more complicated parts of buying an investment property can be greatly simplified with the help of a rental market expert. From the initial purchase to ongoing property management in Knoxville, Real Property Management Marble City is here to help. Contact us online or call 865-265-0535 to learn more about what we offer our investors.
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