The legally binding contract that underlines all of the signed agreements between the buyer and seller of a property is known as a sales and purchase agreement. The contract specifies critical terms such as the closing date, the amount of the deposit, and any unusual circumstances that may necessitate the agreement’s cancellation.
So, if you’ve read part one, here’s the next article of the series.
Phase 4: The Inspection
Inform the Buyer That an Inspection Is Required
An inspection is a required component of any home purchase. Include a clause in which the buyer acknowledges that he or she has been advised to have the house inspected.
“Buyer concedes that it has been highly suggested that Buyer hire a professional inspector to inspect the property at Purchaser’s own expense,” for example. After that, include a space for the buyer to initial.
Indicate Whether the Sale Is Subject to an Inspection
Sometimes the buyer will want the added security of having an inspection performed before finalizing the agreement. If this is the case, you should state that the sale is subject to a property inspection.
You could write, “This offer is contingent on Purchaser obtaining a property inspection and reports at Purchaser’s expense.” The structural, mechanical, pest, and physical conditions of the property may be inspected. Within five business days of this agreement’s acceptance, written notice shall be provided to Seller or Seller’s agent.”
The buyer may also choose to forego the inspection. Include a line for the buyer to initial their agreement to waive inspection if this is the case.
If the Inspection Is Unsatisfactory, Consider Your Options
You may receive a poor inspection report. In this case, the buyer may decide not to proceed with the sale as is. As a result, you should explain the options available to each side:
- The buyer could agree to the condition.
- The seller could repair the damage and provide an inspector’s certification that the damage has been repaired.
- A settlement will be negotiated between the buyer and seller.
- After the seller receives the inspection reports, the agreement becomes null and void if the seller does nothing.
Ask the Buyer to Conduct a Survey
You can include a clause in which the buyer acknowledges that he or she has been advised to have a survey conducted. If the buyer decides not to have a survey, you can include that information. Request that the purchaser signs any waivers with their initials.
Phase 5: Make Guarantees About the Property
List the Seller’s Assurances
A “representation” is a factual statement that the seller guarantees to be true at the time of contracting. If the information turns out to be false, the buyer usually has the option to cancel the contract or sue. You should include a list of the seller’s representations. The following are examples of typical representations:
- There are no zoning, fire, or building code violations.
- The structure is not located in a floodplain or a Special Flood Hazard Area.
- There are no boundary line disagreements.
- There are no setback, easement, or property boundary line violations.
Describe the Deed That Was Conveyed
In most cases, the seller will transfer a general warranty deed to the buyer. A warranty deed basically guarantees that the seller is the rightful owner of the property and that they have the authority to transfer the deed. They also guarantee that no one else has a stronger claim to the title. If these promises are broken, the buyer has the right to sue for restitution.
“Seller will convey to Purchaser good and marketable title by a valid general warranty deed,” for example.
Describe How “Loss Risk” Passes
The building could burn down between the time you sign a contract and the time you close. Who is responsible for the risk? You can state clearly who bears the risk of an accident with a risk of loss provision.
“Seller is responsible for any loss or damage to the property prior to closing,” for example.
