When you have finally decided on your choice of home that you want to buy, you heave a sigh of relief, right? But wait! the hard part is over, but your legal formalities are not. It’s that one thing that separates you from being the legal or rightful owner of your new home. Before you go signing your name on any agreement, it’s important that you know what the sales agreements are all about. Let’s take an understanding at the prevalent guidelines and regulations to sales agreements.
Why is a Sale contract important?
A sales contract is an important legal document that contains all the agreed-upon terms between ‘you’, the buyer and the seller, who sells the property. The contract or agreement needs to be made by a qualified property advocate. It is a document that is legally binding both the parties, so care has to be taken while drafting one. It outlines the terms and conditions that protect the interests of both the buyer and the seller. This document also includes the purchase price that was fixed and is an excellent resource in helping the sale proceeds happen smoothly. To make things easier for home buyers, here’s a list of the five significant clauses that one must include in the agreement.
1) The Indemnity Clause
Indemnity is a contractual agreement between two parties, which outlines a form of insurance compensation for any damages and losses. In an indemnity agreement, one party will agree to offer financial compensation for any potential losses or damages caused by another party, and to take on legal liability for whatever damages were incurred. Indemnity clauses provide management of risk of losses associated with a contract. It must be drafted in a manner that it covers all important aspects. This one’s a crucial clause which the seller and buyer insert as a safety measure to prevent any potential loss or damage. Since there are a lot of people involved in the buying and selling of property, legal issues are sometimes unavoidable. Hence, the seller and the buyer need to carefully draft this clause.
2) The Penalty Clause
A penalty clause states that one contracting party is required to give something, usually money, to the other party if he or she breaches the contract. With such a provision in place, the breaching party is more likely to pay the penalty to the other party instead of settling the matter in court. As such, a penalty clause also serves the purpose of dissuading the party from breaching the contract for fear of the consequences. This is another crucial clause which is binding on both the buyer and the seller. Since property purchase is a question of land and money from both the parties, it is only fair that a penalty amount applies to whoever backs out from the deal for any reason whatsoever.
3) Right to Call Off Agreement
Having discussed the penalty clause, the ‘Right to Call Off Agreement’ is a provision for home buyers. As a purchaser, it is essential that one reserves the right to withdraw from the deal under certain circumstances without being financially penalized for it. A few of these circumstances could be as follows:
- If the Bank Loan is not approved.
- If the seller fails to provide legal or statutory documents for the property.
- If the seller fails to provide all the legal documents at the time of the execution of the sale deed.
- If the buyer finds a property default before the execution of the sale deed.
4) Outstanding Dues
Sometimes, it so happens that the person who previously owned the property might have taken it on loan. Hence, it is vital for the homebuyer to ensure through the purchase agreement that the seller will clear off all the outstanding dues concerning the property before the date of registration.
5) Special Clause
A special clause is a unique clause that every home buyer must include in the purchase agreement. This clause talks about certain special conditions and what the buyer and seller would do in the event of their occurrence. For example: Stating that the deposit money is not due until a few days after the completion of standard provisions such as Pest check and Building Approval.
For an average man, owning a house is one of the significant milestones in life. It is essential that when it comes to buying one’s dream home, one should not forget the little things given in the big picture. To avoid facing legal or constructional issues with the property, one must choose a reliable builder, that has not only a positive reputation in the market but also provides solidly constructed, sustainable, avant-garde homes which fit into your budget.
Key Elements of a Sale Contract
- Identifying the Address and Parties Involved – First and foremost, a purchase agreement must outline the property at stake. It should include the exact address of the property and a clear legal description. Additionally, the contract should include the identity of the seller and the buyer or buyers.
- Price and Terms – The purchase agreement should include the offered price accepted by the seller as well as the means by which it will be furnished. Common methods include paying in full with cash, with a cash down payment and a new mortgage, or with some arrangement involving an already existing mortgage. This information may be detailed in the purchase agreement or a financing addendum may be included to clearly outline the buyer’s down payment and lending situation.
- Closing Date and Costs – The date of the sale’s closing should be included in the purchase agreement as well as the stipulation that any changes in closing must be agreed to in writing. Possession of the property typically transfers to the buyer upon the listed closing date and time. Most importantly, the closing date marks the conveyance of the property’s title from the seller to the buyer. This conveyance may eventually be recorded in a bill of sale.
- Items that are Included or Excluded – The purchase agreement may thoroughly detail all items to be included or excluded from the property’s sale. Certain items may be on display when the property is shown, but not intended to be included in the sale. These excluded items should also be highlighted in the purchase agreement. Outlined items should include not only structures, but also fixtures attached to those structures, including the following items:
- Light fixtures
- Heating and cooling equipment
- Windows
- Window treatments
- Doors
- Built-in kitchen appliances
- Bathroom fixtures…etc.
Contingencies
Sellers and buyers can mandate a purchase agreement contingent upon certain conditions which must be met before the property is sold. Few of the most common contingencies are listed below :
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- Inspection
- Appraisal
- Financing
- Title
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Final Walk through
One of the last steps before you sign your closing papers should be to look over the property one last time. You should also verify that the seller has completed the required fixes and no new problems came up. Finally, check to see that nothing included in the purchase agreement was removed. Though it may seem like the closing process is a lot of work, it is worth the time and effort to get things right instead of hurrying up and signing a deal you don’t understand. Be wary of any pressure to close the deal fast. A property transaction is one of the largest financial decisions many people make. So why not make it smooth with Green Shoots?
And when you need a helping hand, whether you are a vendor or a potential buyer, our experienced Green Shoots experts are waiting to assist you. We offer you experience alongside excellent market knowledge that helps make the buying or selling process as smooth as possible. A little help from the team at Green Shoots can be invaluable when it comes to buying or selling your home.
Green Shoots helps you to open the door to your Dream Home.
