If you can’t afford an attorney to review the most important contract you will ever sign, pay serious attention to the following paragraphs:
- Buyer’s Deposit: It should refundable if you, the buyer, back out of the contract based on your review of property inspections, selling your current home, or if your loan doesn’t come through (or other spelled-out conditions).
- Liquidated Damages: This is a pre-agreed dollar amount that the seller keeps if the buyer breaches the contract (usually 3% of the purchase price). If you don’t initial this paragraph, the seller has to give the buyer back any money deposited.
- Arbitration clauses: If both parties agree to this, you waive your right to a jury trial if you need to sue the seller later. Typically, you will have to go to mediation first and then arbitration. Arbitration is often cheaper than going to trial, so this is a good option for many buyers.
- Property Inspections: Give yourself enough time to have important inspections performed, and review building department records for permits obtained for major work done. This will tip you off to work done without permits or not by licensed contractors, which the seller needs to disclose. If the seller hasn’t disclosed the lack of a permit or hasn’t used a contractor, beware.
- Loan clauses: Put maximum interest rates and maturity dates into the contract, so if your loan is not approved for a loan type and rate that is affordable for you, you can walk away.
- Seller Disclosures: Pay close attention to what the seller says/doesn’t say in this section. A good agent often can spot differences in the property that don’t match up with the disclosure.