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Key Sections of a Real Estate Purchase Contract for Rental Property Investors

Young woman shaking hands after agreeing to purchase a home.If you invest in rental properties in Upper St Clair, you know that acquiring property is key to growing your portfolio. A thorough understanding of the real estate purchase contract is essential for confident buying. A standard real estate purchase contract specifies the terms and conditions agreed upon by the buyer and seller. This blog post will cover the key sections of a real estate purchase contract that every investor should be aware of!

Earnest Money Deposit

Earnest money deposits are generally from 1% to 3% or 4% of the purchase price. This sum is placed in escrow when you submit your offer, showing the seller your commitment to buying the property. At closing, the earnest money deposit will go toward the purchase price.

Offer to Purchase

A detailed property description starts the Offer to Purchase section. Carefully review this description to ensure it has the correct details of the property you are bidding on.

There will likely be a list of items that are included in and excluded from the sale. These lists require close attention since the seller can exclude virtually anything from the sale.

Purchase Price

The purchase price section is a key part of the real estate purchase contract. In this part, you consent to pay the amount stated to acquire ownership of the property.

It’s important to recognize any additional fees or costs associated with the sale, such as the seller paying for closing costs. This section outlines your payment method for the property, whether it’s financing or cash, and the amount of cash you’ll bring at settlement.

Seller Disclosures

This section, seller disclosures, includes any known physical or legal problems with the property. This section includes any lawsuits, environmental concerns, or the need for a new roof.

When making an offer, you should generally take this information into consideration. If the seller fails to disclose any known problems and you find them after closing, the seller could be liable for damages.

Contingencies

The contingency section is another essential part of a real estate purchase contract. This section lists all the conditions that must be met before closing, such as getting financing, completing an inspection, and securing a clear title.

If the buyer doesn’t act, these contingencies are usually automatically waived. However, it’s important to review these contingencies to understand what to expect and how much time you have to fulfill them.

Inspection Period

The inspection period, following your offer submission, is when you can cancel the purchase contract for several reasons. For example, you could discover a significant issue with the property and decide against purchasing it, or you might feel buyer’s remorse.

During the inspection period, you can cancel the contract without consequences if you find something not covered in the initial inspection.

Assessments and Financial Obligations

This section outlines any present or future assessments and their financial responsibilities. If a large project is proposed for the area where the property is situated, this section will outline the project and its associated costs.

It may also list any pending fees you will need to cover at closing, including property taxes, HOA fees, special assessments, or utility bills. It’s crucial to carefully review this information to understand any financial obligations you might incur as a result of the purchase.

Closing and Settlement

This section of the real estate purchase contract specifies the time and place of the sale settlement. This usually lists an anticipated date for the transfer of property. Although many buyers believe they can take possession at closing, that isn’t always the case. For this reason, it’s vital to closely review the closing section of your contract to avoid unforeseen timing problems.

Offer and Time for Acceptance

The final sections of a real estate contract often contain key dates to watch, including the offer’s expiration and contract deadlines. The contract is only valid if the seller agrees to your offer. The offer and time for acceptance section describes the timeframe for making your offer, how long the seller has to accept it, and when the buyer must provide a deposit. Additionally, this section may specify when the contingencies begin and how long you have to meet these terms.

Acceptance/Counteroffer/Rejection

After reviewing the real estate purchase contract and preparing to submit your offer, you must sign at the bottom to indicate acceptance or rejection. Should the seller accept your offer, the purchase agreement becomes legally binding, requiring you to proceed with the transaction per the contract terms.

If the seller makes a counteroffer, which is their response to your initial offer, this paragraph will be part of your purchase agreement. The counteroffer from the seller might include different terms or suggest a new purchase price. If you agree to the counteroffer, you must sign and return it to indicate acceptance.

Having an expert in the rental market guide you through the complexities of buying an investment property can be extremely helpful. Real Property Management Skyline can assist you throughout the process, from the initial purchase to ongoing property management in Upper St ClairReach out to us online or call 412-770-1234 to learn more about our offerings for investors.

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