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Real Estate Purchase Contract Explanation

  1. Premises: This paragraph describes the property you are buying. Include any personal property, such as refrigerator or washer/dryer, that you want included as part of the purchase price.
  2. Purchase Price: This paragraph not only tells the seller what you are offering for their property, but also how you are going to finance it and when you expect your mortgage approval.
  3. Acceptable funds. In Central New York, anything over $500 has to be in a cashier's check. Be sure that this check is made payable t. Be sure that this check is made payable to yourself. You will endorse it over to the sellers at closing.
  4. Real Estate Brokerage Fee. This paragraph discloses the agency relationship with the selling broker and the amount of commission he or she will receive as selling broker.
  5. Seller's Representations. This paragraph states the items that the buyer can rely on, including the fact that the major mechanical systems will be in working order at time of closing.
  6. Title Documents. These are the documents the seller gives the buyer to prove that the seller owns the property, that they have "good title" (no liens on the property), and no unpaid taxes. These documents include the abstract (history of the property), survey (map of the property), and tax search.
scan of contract page 1
  1. Marketable Title. The seller promises to give buyer a title free of major title problems, such as a pending foreclosure action. A utility easement that gives you phone service, electric, or cable will not make the property unmarketable.
  2. Closing. Unless the words "time is of the essence" are added to the closing date, the date written here is a target date that buyer, seller, attorneys, and lender will work toward. This is not a "carved in stone" date.
  3. Closing documents. This paragraph lists the documents that will make you the owner of the property.
  4. Adjustments. Any taxes, fuel oil, rents, or other expenses will be prorated to the day of closing.
  5. Pre-closing Inspection. You have the right to look at the property before you close. Usually the pre-closing inspection takes place the day of or day before closing.
  6. Possession. This paragraph stipulates when the buyers can move in. Buyers and sellers should work together to determine whether buyers can move in right after closing or sometime the next day.
  7. Recording Expenses. This paragraph sets out the fees that the buyer and seller will owe to the County Clerk in order to record the deed and mortgage documents, thereby showing the new owner.
  8. Assignment. Unless otherwise stipulated, the buyer cannot transfer this contract to another party.
  9. Risk of Loss. Seller is responsible for the property until closing.
scan of contract page 2
  1. Miscellaneous.
    1. Seller receives credit at closing for property taxes he/she has already paid ahead of time that runs past closing. Buyer receives credit for any taxes he/she pays at closing that cover the period during which the Seller owned the property.
    2. If the property is damaged between the time the contract is signed and the time of closing, it is the Seller's responsibility to repair the damage. Unpaid water and utility bills (through the day of closing) are also the Seller's responsibility.
    3. Seller and Buyer agree to correct any mistakes made at closing (e.g. math calculations, signing bank documents that were not available at closing, etc.).
    4. Once the closing takes place, the transaction is over and the contract terms are no longer enforceable; except:
      1. The Seller's representations as to the condition of premises as set forth in paragraph 5,
      2. The Seller's responsibility for unpaid bills and property damage as set forth in paragraph 16(b),
      3. Both party's obligation to correct errors made at closing as set forth in paragraph 16(c).
    5. This provision outlines "who pays what" in the event that the lender requires that repairs be made. When negotiating these terms make sure that you are familiar with what your lender is likely to require.
    6. These tests are conducted on properties without public water connections, public sewer hookups or both. Again, find out what tests (and test results!) your lender requires. For example, some lenders require a more detailed water analysis than the one the Department of Health requires.
  2. Notice. Any changes should be made in writing and delivered to the addresses listed on the first page.
  3. Agricultural District Notice. If the seller checks this box, then the property you are purchasing may have noise, dust, and odors associated with farming.
  4. Persons Bound. If you sign this document, then you are obligated to follow through with the terms. This is a real contract.
  5. Lead Based Paint Contingency Addendum and Disclosure. If the house is built before 1978, the seller will tell you if they have had it tested for lead paint, and you will have the opportunity to have it tested yourself.
  6. Attorney Approval. If you check the box making the contract contingent upon attorney approval, your attorney must review the contract and approve it before it becomes legally binding. If your attorney does not disapprove it within 5 days after he or she has received it, then the contract is automatically approved and binding.

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Explanation of Contract to Purchase Courtesy Charles M. Sprock, Jr, Esq.
315-477-0100 x18

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