Purchase Agreement Clauses That Can Save Your Butt
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
Essential Purchase Agreement Clauses to Protect Your Interests
Summary:
Including these critical clauses in your purchase agreement can save you from financial pitfalls.
Keywords:
purchase agreement, agreement, real estate
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A real estate purchase agreement is more than just an offer?"it's a legally binding contract once signed by both parties. By incorporating strategic clauses, you can safeguard your interests and potentially save money. Here are some key clauses to consider:
Six Key Purchase Agreement Clauses
1. Earnest Money Clause:
To maintain credibility with a smaller initial earnest money deposit, include a clause like: “$100 earnest money deposit, to be increased to $2,000 upon acceptance of this offer.” Alternatively, stipulate the increase “when all contingencies are met.” This protects your deposit if issues arise, such as unexpected home defects found during inspection.
2. Inspection Contingencies:
Consult an agent for the best wording, but ensure you have: “Contingent upon a home inspection and buyer's approval of the results; inspection to be done at buyer's expense within ten days.” This entitles you to have the home inspected and to withdraw from the deal or renegotiate if unsatisfactory findings emerge.
3. Assignment Rights:
If you're purchasing with a partner not present to sign, planning to flip the property, or might involve another investor, make sure your offer allows for this flexibility. Adding "and/or assigns" after your name is typically sufficient. This permits you to add partners or assign the contract to someone else.
4. Seller-Paid Costs:
Negotiate that the seller covers closing fees, title insurance, recording fees, and even points on your loan. Many sellers focus on the sale price rather than these specifics, offering you leverage in negotiations. In return for dropping these costs, aim for compensations like a reduced interest rate if part of the purchase is seller-financed.
5. Financing Contingencies:
To safeguard your deposit if a loan falls through, include: “Subject to buyer obtaining a firm commitment for suitable financing within ten days.” If necessary, clarify what “suitable” means to appease the seller.
6. Spouse's Approval Clause:
Add a clause such as “Subject to a walkthrough inspection and approval of home by spouse (or partner - state their name) within two days.” This allows you to withdraw with a full deposit refund if your partner disapproves. Keeping the timeframe short can encourage seller acceptance.
These clauses, sometimes labeled “weasel clauses,” offer protection by allowing you to withdraw under certain conditions. Don’t be concerned about the label?"a seller can always refuse your offer, and using these clauses smartly can ensure your financial protection.
You can find the original non-AI version of this article here: Purchase Agreement Clauses That Can Save Your Butt.
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