Understand the Contract
TLDR: Understanding the main components of an offer will help you make informed decisions and will prepare you for what happens after you come to an agreement on an offer with a seller.
An offer is comprised of a collection of clauses that make up a contract. It’s not unusual (and we’d go as far as to say it’s common) for home buyers and sellers to simply sign on the dotted line when it comes to real estate contracts. Someone else assembles the paperwork and you just “sign here.”
We’d like to change that.
Here, you can read as much (or as little) about the various elements of the contract and learn about the fine print to your heart’s content. We’ve also included a Too Long Didn’t Read (TLDR) summary at the top of each page in case you’re looking for a concise overview.
The Contract Clauses
As you fill out the form, your offer will be tailored for you with the customized verbiage appearing as you select and type answers. Here's a quick overview of the primary components of an offer.
The Property
This is the address and any personal property of the seller’s you’d like to buy
The Sales Price
The purchase price of the property
Earnest Money Deposit
How much you’ll give to the seller if you decide to terminate the contract for a reason not stipulated in the contract
Closing Cost Assistance
A cash equivalent of how much the seller will give back to you at closing, reducing your cash to close
Home Warranty
Similar to homeowner’s insurance for interior items such as broken appliances, leaky faucets, etc. that is often paid for by the seller
Prorations
Describes how taxes and fees will be prorated at closing
Real Estate Commissions
Each party will be responsible for his or her own real estate agent
Contingencies
These clauses are the reasons that allow buyers to terminate the contract without repercussions. Common examples include financing, appraisal, and inspection contingencies
Financing Contingency
This contingency allows you to walk away from the sale in the event that you’re unable to obtain financing
Appraisal Contingency
If the property doesn’t appraise for at least the sales price, you’ll be able to terminate the contract
Inspection Contingency
If you and the seller are unable to agree on terms about the repairs that need to be done, you’ll be able to walk away from the sale and still receive your EMD if you have this contingency
Radon Contingency
In the event that radon levels are higher than the recommended limit, you will receive your EMD if you decide to end the agreement
Termite Contingency
Should termites or termite damage exist, you will be able to walk away from the contract
Settlement and Possession
Settlement is the date you legally own the property, and possession is the date you take the physical property. These dates are not always the same, depending the circumstances of the buyer and seller.
Title and Title Insurance
This section ensures that you’ll receive a clear title before closing. If you’re obtaining a loan, you will likely need to obtain title insurance prior to settlement
Disclosures
This is information provided by the seller about a property that may affect your interest in purchasing the property. Requirements exist at all levels of government and vary from state to state
Homeowners’ Association Disclosure
In Virginia, buyers are permitted three days after receipt of the Association Disclosure Packet to terminate the contract
Condominium Association Disclosure
In Virginia, buyers are permitted three days after receipt of the Resale Certificate to terminate the contract
Other Disclosures
Disclosures required of Sellers varies widely state by state. Disclosures are notices about the property. It’s critical that you read these as these problems become your problems.
Miscellaneous Terms
Anything else you or the seller would like to add to the contract
Survey
This is not generally a negotiated clause. Rather, the buyer has the option before closing to pay a surveyor for a map and legal description of the property.
Comment
This is a note to the seller and is not legally binding