Top Things to Look Out For in a Residential Real Estate Contract
Purchasing a home is often the first large business transaction for many individuals and families. Unless you are already experienced with contracts, investments, transactions, and financing, the residential real estate purchase and sale process can feel overwhelming. To demystify the process, our experienced Chicagoland residential real estate attorneys explain below several of the most important things to watch out for in a residential real estate contract.
The Basic Terms of the Deal
The residential purchase agreement will have the comprehensive terms of the deal. Make sure you identify, understand, and agree with all of the basic terms included. The most basic terms of the deal include:
- Parties to the transaction
- Property to be exchanged
- Sale price
The contract will also lay out other important terms to the transaction. Beyond the basic terms, make sure that you have included and are comfortable with all of these terms as laid out in the contract:
- Amount of earnest money deposit
- Financing terms
- Closing date
- Possession date
- Personal property and fixtures included in the sale
- Right of inspection
- Tax prorations
We’ll go through a few of these important terms in more detail below.
Purchase Price and Earnest Money Deposit
Perhaps the most important term of the deal is the purchase price and the earnest money amount. The purchase price is the ultimate amount of the sale, while the earnest money is a percentage of the purchase price paid up-front and held by a third party in escrow. In many contracts, the seller has the right to keep the earnest money deposit if the deal goes south through no fault of the seller.
Property and Fixtures Included
Real estate contracts typically include a section identifying common household appliances that may be included in the sale, such as a refrigerator or an oven, as well as space for additional property. The realtor, seller, and buyer should be clear on which assets are included in the sale and which are not.
The purchaser is technically responsible for paying the real estate taxes on the property for the year in which the transaction occurred. The contract should cover the seller’s obligation to pay the buyer a portion of those taxes back for the part of the year the seller still owned the property.
Attorney Approval/Modification Contingency
It helps to have a real estate professional who is on your side review your contract before you close. You can and should include a provision in the contract that gives you the opportunity to have your legal counsel review the deal once you’ve made an offer before closing. If you make an offer and sign a contract without an attorney review contingency, you are committing to the terms of sale without the right to have an attorney suggest modifications or negotiate on your behalf.
Other Important Contingencies
Contingencies include anything that must happen for the sale to go through. You can include a number of contingencies to ensure that you are not stuck with a piece of property you ultimately cannot purchase or no longer want for one reason or another. Common, important contingencies include:
- Mortgage/financing contingency
- Sale of current home
- Successful inspection
- Existing leases
- Known issues and necessary repairs
If you need seasoned advice and assistance with an Illinois real estate matter, get trusted, thorough legal help by contacting the Chicago residential and commercial real estate lawyers at MacDonald, Lee & Senechalle in Hoffman Estates at 847-310-0025 and in Des Plaines at 847-298-5030.