Purchase Contract Clauses That Can Save Your Butt

By
Real Estate Agent with Alex Lowery Real Estate

REMAX DFW Associates Frisco TX

The real estate purchase agreement is more than just a casual offer. The moment you and the seller sign it, it is a legally binding contract. Since you can put what you want in your offer, why not include some of the clauses that smart buyers use to protect themselves and save money? Some suggestions follow. 

Six Purchase Agreement Clauses 

A better earnest money clause. You can put a small earnest money deposit down and still be taken seriously, if you include a clause like this: "$100 earnest money deposit, to be increased to $2,000 upon acceptance of this offer." You could also have it increased "when all contingencies are met." This way, if there's an argument about you backing out because the inspector found foundation damage, for example, you won't have your money tied up while this is being resolved. 

Inspection contingencies. Ask an agent about the wording, but basically you want something like this in the purchase agreement: "Contingent upon a home inspection and buyer's approval of the results; inspection to be done at buyer's expense within ten days." Now you the right to have an inspection done, and if anything negative is found, you can refuse to "approve" of the results, and get your deposit back, or you could re-negotiate a lower price. 

Assignation. If buying with a partner who isn't there to sign the offer, or if you want to "flip" the deal to another investor, or if you may need to involve a partner for purposes of funding the deal, be sure that the purchase offer gives you that right. Putting "and/or assigns" after your name on the offer is usually sufficient, but ask the real estate agent what the local custom or language is. This lets you add another buyer to the deal, or assign the whole contract to another. 

Let the seller pay. Specify that the seller pays for the closing fee, the title insurance, the recording fees, and even the points on your loan. Sellers often just want the sale at a given price, and don't care about the details. What if they do care? You have given yourself some negotiating points. Get something for dropping each of the costs you included, like maybe a reduced interest rate if the seller is financing part of your purchase. 

Basic financing contingencies. Suppose the loan doesn't come through, and you can't buy the home. You'll lose your deposit, unless you have something like this in the agreement: "Subject to buyer obtaining a firm commitment for suitable financing within ten days." If the seller balks at the vague language, you can specify what "suitable" means in terms of interest rate and such. 

Spouse's approval clause. This could be as simple as "Subject to a walk through inspection and approval of home by wife (or partner - state their name) within two days." Now, if your wife says no within two days, you can back out of the deal and get your deposit back. If you want the seller to agree to this one keep the time frame as short as you can. 

The above clauses are often called "weasel clauses," because they give you ways to back out, or "weasel out" of a real estate agreement. Don't worry about the label. A seller has the right to say no to your offer in any case. You, on the other hand, have the right to use these purchase agreement clauses to protect yourself. 

By law, only an attorney can provide you legal advice - not a real estate agent or broker. The suggestions above are just that, suggestions. Please seek the advice of an attorney for the exact legality and wording of any clause you may choose to incorporate into a real estate purchase contract. 

Please feel free to give me a call at 214-234-6901 or email me at Grant@GrantHowell.com. You may also visit my Web site www.BrokerMyHouse.com for additional information on the real estate services I provide. I look forward to hearing from you.

REMAX DFW Associates Frisco TX

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Tina Howell 04/09/2010 03:17 AM
Topic:
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Texas Collin County Frisco
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Ambassador
780,252
Doug Rogers
Bayou Properties - Alexandria, LA
Your Alexandria Louisiana Agent

Sound advice. As a small hobby, I like to look at some "purchase agreements" written by FSBO's. Better digested with a good bottle of wine.

Apr 08, 2010 08:53 AM #1
Rainmaker
929,118
Kay Van Kampen
RE/MAX Broker, RE/MAX - Springfield, MO
RealtorĀ®, Springfield Mo Real Estate

Great clauses to use.  I already use some of them.

Apr 08, 2010 01:59 PM #2
Rainmaker
361,988
Jeanne Dufort
Coldwell Banker Lake Country - Madison, GA
Madison and Lake Oconee GA

re: Let the seller pay.  You are wrong if you don't think sellers look at their net!  Some institutional sellers have "programs" and they will auto-reflex agree to pay some closing costs.  But not so with private sellers in my market.

A better way to sell this is "structuring the purchase" to meet your buyers needs. If they have plenty of cash - then go for the lowest possible, cleanest offer.  Short of cash - bundle closing expenses in with the contract.

Apr 09, 2010 04:35 AM #3
Rainmaker
763,463
Steve and Jan Bachman
RE/MAX Gateway, Reston, Herndon, Ashburn, Sterling, Fairfax - Herndon, VA
Realtors - Northern Virginia

Well said Grant...our Northern VA contract now approaching 26 pages with addendums has incorporated many of these. I do like the earnest money in stages clause you have here ....perfect for the right situation.

Apr 13, 2010 02:30 AM #4
Rainer
18,762
Jim Graham - REALTOR - Sumter and Shaw AFB real estate
Prudential John M. Brabham Real Estate - Sumter, SC

Grant, I do like these. They seem to wise advice to tidy up areas where it causes the most confusion. Thanks for your input.

Jim Graham

Prudential John M. Brabham

www.sumterrealestateforsale.com

Jun 06, 2010 07:21 AM #5
Rainer
174,627
Betsy Schuman Dodek
Washington Fine Properties - Washington DC Area Real Estate - Potomac, MD
SearchPotomacHomes.com

Grant, in our market ~ DC area, buyers and sellers almost always split transfer and recordation fees. The seller rarely pays for any of the buyers closing costs like deed prep etc..

Thanks,

Betsy

Feb 22, 2013 08:18 AM #6
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Grant Howell

Broker/Owner 214-234-6901
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