Real estate transactions typically involve hundreds of thousands of dollars. Disputes on contracts that involve such huge sums can cost you considerable money and legal problems. Below are tips to reduce the risk of contract disputes during a home purchase.
Have Everything in Writing
Oral contracts may be enforceable, but they are harder to enforce than written contracts. Include everything in the written contract so a dispute doesn't end with your word against the other party's. You should especially be careful with contract amendments.
Say you negotiate with the seller to include their potted plants and storage shed with the home sale. Don't shake your hands on the deal and assume you will get the items. Get the seller to include the items in the sale agreement.
List All the Parties to the Contract
Property purchase contracts frequently involve two parties — the seller and the buyer. However, these contracts sometimes involve more than two parties. For example, you can buy a property jointly with your child or friend or multiple owners.
Include every party in the contract in case of multiple owners and have them sign it. Otherwise, one of the owners might claim ignorance of the contract's terms later. For example, a joint buyer might claim they disagreed with the closing cost arrangements.
Define All Obligations and Responsibilities
Your contract should spell out the expected duties and responsibilities for all the parties involved. For example, you should know who will pay for the closing costs or how you intend to divide them.
A good contract specifies its clauses or expectations — it doesn't generalize things. Generalization is bad since it leaves things open for interpretation. Consider a clause that expects the seller to meet their contingencies by the end of the week. Such a phrase is bad because the buyer and seller might disagree on the definition of the end of the week. The clause should specify the date and time.
Read and Understand the Contract
Every party to a contract should read and understand the contract before signing it. No one should rush the other or coerce them into quickly signing. Let everyone take their contract copy home, read it, and consult at leisure. That way, each of you can renegotiate unfavorable parts of the contract.
Lastly, consult real estate professionals when drafting and reading the contracts. A real estate attorney and an agent will likely understand the contract wording better than you. At the very least, don't sign a contract before the professionals scrutinize and help you understand it.Share