Price is not the only important aspect of a purchase agreement. A purchase agreement and any counter offers should include all terms of the transaction.
In Minnesota most real estate agents fill out pre printed purchase agreements and accompanying forms that have been drafted by the Minnesota Association of Realtors forms committee who have consulted with legal counsel prior to release of the forms. Buyers need to fully understand all the terms of the purchase agreement prior to it being presented to the sellers
It’s surprising to observe that many buyers don’t really know the details of the agreement they are signing and depend on their real estate agent to insure that the purchase agreement reflects their wishes. Agents should make sure that this is not the case for their clients and buyers should not allow it. Buyers can get a copy of the blank agreement in advance so they can read it and be ready to ask questions when it comes time to fill out and sign the agreement.
More often than not a purchase agreement includes some standard contingencies. Contingencies are conditions that must be met before the purchase can be completed. The more common contingencies are for the buyer being able to obtain financing, for the property appraising for at least the stated purchase price, for the buyer accepting the results of negotiations regarding an inspection and less common in this market for the sale of the buyers home.
Contingencies often times have time constraints such as a deadline for conducting an inspection and negotiating how to handle defects. Minnesota’s inspection contingency gives the buyer the option of accepting the home as it was inspected, notifying the seller that repairs have to be made or compensation for such defects or simply deciding not to buy the home because of defects.
During the prior frantic sellers market offers were often submitted with no requested contingencies so that the offer will be more desirable to the seller. The occasional unfortunate outcome of this practice was that lawsuits were filed after closing when defects were discovered that the buyer was not aware of.
Occasionally, as it was during the frantic sellers market, it makes sense to forgo some contingencies but only if the buyer is fully aware of the consequences. Recently a buyer was involved in multiple offers on a Lake Minnetonka home. In order to make the offer more desirable the buyer did not include a contingency for the home to appraise for the stated purchase price.
Because of the fact that there were too few comparables in the area within the last 6 months the property did not appraise for the stated purchase price. The buyers were fully aware that this could happen so the buyers were prepared to increase their down payment in order to go ahead with the purchase.
The price and contingencies are only part of the picture. Some of the other items that are called for in a purchase agreement are earnest money amount, possession date or time relative to closing, the closing date, any personal property that may go with the property such as appliances, curtains etc., and occasionally sellers will exclude items such as a valued chandelier. Being very specific is important.
Leaving issues to be worked out later could become difficult especially if a seller becomes much less cooperative after the seller begrudgingly agrees to pay for defects found during the inspection.
THE CLOSING: Make sure you know what you are signing. Have your agent explain any items you are unsure of.
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