1. I WAS TOLD THAT I DO NOT NEED A LAWYER TO DRAFT OR REVIEW A PURCHASE AGREEMENT BECAUSE REAL ESTATE AGENTS USE STANDARD FORMS AND ARE EXPERIENCED IN COMPLETING THESE FORMS AS PART OF THEIR JOB. IS THAT RIGHT?
There are many pre-printed purchase agreement forms used in the real estate industry and, although frequently referred to as "standard," their terms can vary widely. The Jamestown Bar Association has, however, created a purchase agreement designed to be well-balanced in reciting the respective obligations of buyers and sellers and to highlight issues for negotiation. Remember that when using any pre-printed form, the pre-printed language is for convenience only; all of the terms in the documents are negotiable. As with any contract, you should carefully review its terms and make sure that you understand the legal effect of each of those terms before you sign the agreement. A lawyer can help you with all of this and may be consulted before you sign any form of a purchase agreement.
2. I FOUND A HOUSE I MAY WANT TO BUY BUT IT IS "FOR SALE BY OWNER" AND THE SELLER'S LAWYER HAS ALREADY DRAFTED A PURCHASE AGREEMENT. DO I NEED MY OWN LAWYER TO HELP ME?
Yes. The seller's lawyer represents only the seller's interests, and what may be in the seller's best interest may not be in yours as a buyer. The seller's lawyer has no ethical or contractual obligation to protect your interests. Remember, you can negotiate all of the terms of a purchase agreement up until the time that both you and the seller have accepted the terms by signing the agreement. Your lawyer can advise you on whether the proposed terms are in your best interest and can suggest appropriate additions or modifications to better protect you.
3. HOW DO I BUY A HOUSE THAT IS "FOR SALE BY OWNER"? DOES THE SELLER OR THE BUYER PREPARE THE PURCHASE AGREEMENT?
The first step is to contact a lawyer who can advise you about reasonable and achievable terms in a transaction. The next step is to contact the owner and discuss these terms. Either you or the seller can then prepare a purchase agreement, and your lawyer can help you with this process to ensure that your interests are protected.
4. IS A PURCHASE AGREEMENT A CONTRACT OBLIGATING ME TO BUY A HOME, OR IS IT JUST PART OF THE NEGOTIATION LEADING UP TO AN ACTUAL CONTRACT TO BUY A HOME?
Once the purchase agreement and any attachments to the agreement are signed by both the buyer and the seller, these combined documents become a binding, enforceable contract to buy and sell a home. All negotiations as to the terms of the purchase agreement will take place before both parties sign the agreement.
5. SHOULD I HAVE A LAWYER REVIEW MY PURCHASE AGREEMENT BEFORE OR AFTER I SIGN IT?
As with any contract, you should have your lawyer review your purchase agreement before you sign it so that any changes or modifications needed to protect your interests are made before you sign the document. Once you sign the agreement, it is generally too late to make any changes. Although it may greatly reduce your bargaining power, one alternative is to include a contingency
provision in the purchase agreement that allows your lawyer to review the contract and approve or disapprove of the contract after you sign it; any changes that might be necessary after your lawyer reviews it will then be negotiated. The specific language of this contingency can be obtained from your realtor or your lawyer to ensure that you do not lock yourself into a deal that you are not prepared for.
6. WHAT SHOULD I LOOK FOR IN A PURCHASE AGREEMENT TO PROTECT ME AS A BUYER?
Each purchase of a home involves unique circumstances that should be addressed in the purchase agreement. To adequately represent and protect your interests, your lawyer should review with you any information that pertains to the house itself, your personal needs and expectations, your intended use of the home, your choice of financing and the dates you want for a closing and for taking possession of the house. This review should include any disclosure forms on the condition of the home, as well as any other documents that the sellers may have provided to you. The following is just a sample of what your lawyer can do for you:
a) Make sure that the property described in the purchase agreement is truly the property you intend to purchase
b) Help you determine the type of title that you are willing to accept from the seller
c) Make sure there are adequate protections for you against liens and encumbrances on the property
d) Determine if there are any contingencies to your purchase that need to be included in the purchase agreement
e) Determine if the price and terms of your financing are correct and acceptable
f) Determine if there is any risk of exposure to environmental liability claims
g) Help you determine if the physical condition of the property is acceptable to you
h) Help you determine an acceptable date of closing and date of possession
i) Determine who should pay the many different categories of taxes and special assessments
on the property and when
j) Determine the length of time that your offer should be left open to the seller
k) Advise you as to the likelihood of closing on time and necessary arrangements for changing utilities and scheduling movers
l) Establish escrows for repairs or for water and septic inspections and corrections if inspections fail
m) In some instances arrange for “early entry” or “post closing occupation”
7. IF THE BUYER'S MORTGAGE IS DENIED CAN I KEEP THE EARNEST MONEY?
Whether you can keep the earnest money or not is completely controlled by the terms of the purchase agreement. Your lawyer can review the purchase agreement and any documents related to it and advise you on what your rights are with regard to the earnest money. Generally, however, the earnest money is refunded if a mortgage is not obtained.
8. WHAT DOES IT MEAN IF WE HAVE "CONTINGENCIES" IN OUR PURCHASE AGREEMENT? DO WE HAVE AN AGREEMENT OR NOT?
Even with contingencies, a purchase agreement is valid and binding on the parties who sign it. A contingency simply means that your closing is dependent on an occurrence that you may, or may not, control. If the specified occurrence does not happen, the purchase agreement terminates and cannot be enforced by either the buyer or the seller. As an example, a buyer may need to obtain a mortgage loan before buying a house. A financing contingency would be included in the purchase agreement so that if the buyer could not obtain an acceptable mortgage loan, the purchase agreement terminates. Other contingencies might require that a buyer sell her current home or obtain an acceptable home inspection before closing the sale and purchase. Before signing a purchase agreement, it is important to evaluate whether or not you need any particular contingency to protect your interests.
9. IS SELLING OR BUYING A CONDOMINIUM OR TOWNHOUSE ANY DIFFERENT THAN SELLING OR BUYING A SINGLE FAMILY HOME?
The sale of a condominium or townhome involves a few more documents than the standard residential home sale. A seller must provide a buyer with the condominium or townhome association by-laws, articles of incorporation, covenants and other relevant documents for review. In addition, the Association may need to be notified of a new purchaser and, in some instances, the Association may need to approve the sale. Because the condominium and townhome documentation governs the actions and rights of residents in those developments, buying a condominium or townhouse requires, in addition to resolution of the customary purchase issues, a thorough review and analysis of that documentation.
10. SHOULD I GET A QUIT CLAIM DEED OR A WARRANTY DEED FROM THE SELLER AND WHAT IS THE DIFFERENCE?
A quit claim deed transfers the seller's interest in and ownership of the property from the seller to the buyer. A warranty deed does the same thing, but it includes statutory warranties that title to the property is clear and no liens or encumbrances exist against the property. A warranty deed may, and frequently does, include exceptions to these warranties.