A written real estate purchase agreement is essential when buying a home. It benefits the buyer and the seller and acts as a legally binding agreement. With strong negotiation skills and familiarity with purchase agreements, real estate agents can help protect their client’s interests and facilitate a smooth transaction.
A real estate purchase agreement is a written document outlining the terms and conditions of a property sale. A well-crafted agreement can limit future challenges and legal issues like property line disputes or valuation discrepancies.
The role of a real estate agents is to ensure that purchase agreements are tailored to their client’s needs and protect the client’s best interests. Real estate professionals should be prepared with the knowledge and skills to address the appropriate concerns in a real estate purchase agreement and maintain a commitment to ethical behavior and best practices.
Agents are responsible for putting together the final draft of a real estate purchase agreement for a house or other property. However, several parties are usually involved in creating the real estate contract, including the buyer, seller, real estate agents, and sometimes real estate attorneys.
There should be a dialogue between the buyer and seller or their respective representatives while constructing a purchase agreement to determine the final terms. Seeking legal assistance is also recommended. Consulting with a lawyer before scheduling the signing can ensure the agreement is legal and binding.
Every real estate purchase agreement is different. They’re individually constructed to reflect the specific requirements of the sale. However, real estate contracts also have some common elements that must be included to make the agreement valid; this includes price, contingencies, earnest money, and a closing date. It’s essential for real estate agents and the buyers and sellers to review the agreements to make sure they’re outlined clearly.
The sale price, the down payment, and the payment terms of the transaction should all be stated in the opening section of the real estate purchase agreement; without a price, the document is not legal. If a bank or mortgage company is involved, their information should also be included in this section.
A contingency in a real estate purchase agreement is a clause that states a condition of the sale. One example is an appraisal or home inspection requirement before the property sale can be finalized. Another contingency could be a deadline for the offer to be accepted. Some contingencies are points to negotiate, while others are considered standard in many real estate contracts.
Earnest money is money deposited into escrow by the buyer to show good faith to the seller when the purchase agreement is signed. This deposit is often around 3% of the home’s value and may or may not be refundable. Earnest money does not guarantee the close of the sale; it takes the house off the market until contingencies have been met.
The closing date is set when all other real estate purchase agreement points have been confirmed and both parties are ready to move forward. Real estate agents can accompany the buyer to the closing, but they cannot sign the sale agreement for them. A third party, usually an agent or real estate attorney, can represent sellers.
It’s essential to thoroughly research the property, the market, and any counterparties who might bid against the prospective buyer. This can be done by looking up other property listings in the neighborhood and studying market trends. Knowing current mortgage rates is also helpful. Additional resources are available from the REALTORS® Confidence Index.
Understanding clients’ priorities is equally important. Know what their needs and wants are and ask detailed questions. This can help align realistic expectations in finding properties that meet their requirements. Failing to do this can result in wasted time and lost clients.
Real estate agents need to be expert negotiators. Natural ability is certainly helpful, but there’s no substitute for experience. Seasoned real estate professionals develop negotiation skills over time as they work with different types of buyers and sellers. Here are some of the basics:
As a REALTOR®, a member of the National Association of REALTORS®, you adhere to the REALTOR® Code of Ethics, which ensures you serve your clients' best interests. In this way, you become an advocate for your clients, and protecting them from potential pitfalls is necessary. This requires a high level of transparency and disclosure to establish trust. Tools like contingencies and protective clauses can safeguard your clients and mitigate concerns. For example, you can set up milestones for the tasks the seller requires in a purchase agreement, like requiring a water test by a specific date if it’s required by state law.
Other common contingencies revolve around inspection, financing, and appraisal. Have clients handle these immediately to avoid delays or complications. If they’re buying a distressed property, the purchase agreement for the house may have more detailed contingencies and “as is” clauses. Pay particular attention to deadline dates to avoid canceled contracts before the deal can close.
Ensure your buyer meets all the terms of the deal before closing and prepare for potential last-minute challenges. Here’s a checklist to follow for a smooth closing process:
Prioritizing clients' interests throughout the real estate purchasing process is of utmost importance for real estate agents. You can hone your craft by practicing negotiations with family members or close friends, learning from your mistakes, and staying current and up to date with ongoing training that showcases your Commitment to Excellence (C2EX) as a REALTOR®.