Understanding a real estate contract is not for the faint of heart! There are complexities of a real estate contract that are important to sift through if you are thinking of selling your home or are going through the process right now. It is a big decision to make and we understand the weight that selling a home can bring into your life. Being informed will help you make the real estate decision for you and your family. Afterall, selling a home can potentially be one of the largest financial decisions you will face, so making sure you are educated during every step of the way will help you navigate the house selling process with more confidence and ease.
A real estate contract is also called a purchase sale agreement in California. This is when a contract is is executed by a party selling a property and a party who is offering to purchase a property. Contract Counsel helps us understand a real estate contract more fully and explains that, “All contracts must include specific essential elements to be valid and legal. In California, a real estate contract must have the following four essential elements:
- The contract must be executed by parties who are legally capable of entering a contract
- There must be mutual consent
- The contract must have a lawful objective
- The terms must include consideration (an exchange of things of value)
If the real estate contract is missing any of these elements, it will be deemed invalid and will not be legally enforceable under California law.” So now it is clear that a real estate contract is a legally binding document and needs to be handled accordingly. There are steps that need to be taken and can’t be overlooked.
What is the First Step?
Well, when dealing with a real estate contract, the first step is when the buyer initiates a contract by making an offer. If you are putting an offer on a house, well, then, congratulations! Entering into a real estate contract is a serious matter! When you make an offer, you must first prepare a purchase offer. Prevu.com tells us that, “Purchase offers require the offer price, financing terms, address of the property, relevant contingencies, and a target date for closing the deal. Your purchase offer also needs data around inspections, appraisals, the number of days around a contingency, and what a buyer’s strongest offer is. Make sure to include any purchase contingencies, such as selling your home to finance the new one. Some offers have financing contingencies around qualifying for a mortgage, which is why sellers prefer buyers with a pre-approved mortgage. ” Now some of the most common offer contingencies that we see in California include: inspection, appraisal, financing, and a contingent sale. If you are up against others trying to purchase the same home, these contingencies can put a red flag on your offer and make it less appealing than other offers without tricky contingencies.
What is Included in a Real Estate Contract?
There are many components when dealing with a real estate contract, which is one of the reasons why going through a house sale can be especially challenging. When you work with Trusted House Buyers we hold your hand through every step of the process because as you read on, it can be a daunting list! Selling a home can be an emotional roller coaster and it can also be a bit overwhelming in terms of paperwork, notaries, and execution. There are ups and downs of going through the home selling transaction process and it can surprise you at every turn. Let’s look more closely at what is included in a real estate contract:
- Purchase Price: the purchase price is quite possibly one of the most important components of a real estate contract. Now coming to an agreement of the purchase price can be just the beginning of the roller coaster. You may be making an offer that is too low, that needs to be negotiated, and/or may be in a bidding war with others that are trying to purchase the home you are after. Once your offer is accepted, this means the price you are offering is accepted and you can sigh a big sigh of relief. But don’t get too comfortable yet! There are definitely more hurdles to conquer.
- Closing Date: Agreeing up on a closing date is essential to getting to the finish line with all the necessary documentation in hand. Investopedia states, “Closing is the final phase of a transaction, typically involving real estate. Understanding what occurs during the typical closing process will help the process go smoother. If you are approaching closing in your home buying process, make sure you are ready to sign multiple documents to ensure the property officially becomes yours.” This closing date needs to be agreed upon. If you have unique circumstances or a unique timeline this could be a hard point to get through. When working with Trusted House Buyers we operate on your timeline and can cater the closing date and timeline to your specific needs. We understand everyone’s situation is quite different. You may be relocating for work, dealing with a death in the family, or a divorce. Each situation requires time and space to work through. At Trusted House Buyers, we can give you that peace of mind.
- Agent Commissions: Most buyers and sellers usually hire a real estate agent when buying or selling their home, but this comes with a hefty price tag. The average real estate commission in California is approximately 4.92% of the home’s sale price. Agent commissions can end up costing you tens to hundreds of thousands of dollars depending on your home’s sale price. This can be quite the dent in your profit!When working with Trusted House Buyers, one of the hallmark aspects of our process is that there are NO REAL ESTATE commissions. This means more money in your pocket at the end of the deal. This can be life changing!
- Earnest Money Deposit: this is the deposit made by the buyer when the contract is signed to show the seller they are committed to purchasing the property. In California, the standard deposit is 1%-3% of the total purchase price. This shows a commitment to the deal and you are one step closer to the finish line.
- Contingencies: as we noted above, contingencies are usually a road block and must be satisfied before moving on to the next step. Oftentimes, buyers usually have a home they are waiting to sell or they are waiting to get through the dreaded inspection which could highlight issues with the home that can be oftentimes be very costly. At Trusted House Buyers, there is no stress surrounding the inspection or any contingency for that matter. We buy homes as-is and are not afraid of distressed home in need of serious repairs. However, the average buyer can run for the hills if certain issues are revealed during an inspection. This part of the process can be a nail biter and can make or break the deal.
- Contingency Removal Period: this is when all contingencies are moved and the buyer is ready to move forward with the closing. If you have made it through the gauntlet to this step of the process, you can see the light at the end of the tunnel!
- Disclosure Requirements: disclosures are conditions that the seller must disclose to the buyer before the sale is finalized. California requires various disclosures be revealed such as a death on the property, lead paint, or environmental hazards to name a few. Some buyers aren’t phased and others find this step very hard to work through. You can make your way to this final step, to find the rug being pulled out from under you.
The Simplicity of Trusted House Buyers
If you are eyes are bugging out of your head after reading through the list above, well, you have every right. Working your way through a real estate contract is a long and daunting process. It almost feels like a video game where you are dodging bullets left and right, trying to get to the end of the game successfully. Some transactions run smoothly, but that is rare. As you can see, there are various hurdles that can cause the transaction to stall or stop. When working with Trusted House Buyers, we buy your home in any condition, eliminating the scary inspection reports or disclosures. We also don’t ask for commissions or any hidden fees for that matter, helping you get more money for your home at the end of the day. We handle all of the paperwork and are happy to provide insight and information every step of the way. The best part is, we can usually close with 10 days so you can have cash in your hand and stress out the door quickly and efficiently. The simplicity of working with Trusted House Buyers streamlines the house selling process and helps you work through the real estate contract and the transaction as a whole in quick and timely fashion. Give us a call today at 619-786-0973 to see how we can help you get through your house selling process with ease!
