Reading a real estate contract can be confusing at time. Below are some common terms used in a contract.
Offer: Drafting a contract with terms satisfactory to the buyer. An offer consists of a contract with all contingencies and a EMD. an offer is not a contract until it is fully ratified by both sides.
Ratification: the offer or counter offer has been officially accepted by both side. A contract is ratified once both sides sign the offer.
The date of ratification is the date of the last signature or initials from the last party.
EMD: Earnest money deposit. It is a sum given as consideration to the seller regarding his/her property. It shows the seriousness of the buyer. The higher the amount typically the stronger the offer.
Contingencies: Certain events must be met in order for the contract to proceed accordingly. In the event that some of those events are not met, the contract can be cancelled mutually.
Inspection: the property will be inspected by a licensed inspector. Upon the result, if satisfactory , the contingency can be removed if not, the buyer and seller can engage in negotiation to find the best solution and proceed accordingly.
As is: a property can be purchased as is. Meaning that the seller will make no repairs nor offer any credit for any repair needed. The offer can still be contingent upon inspection but in this case, the contract might be cancelled if the results are not satisfactory to the buyer.
Disclosures: the seller has to provide a property disclosure form, stating everything they know about the condition of the property since they have owned it. Whether good or bad, it must be disclosed. A seller who intentionally withhold information about his/her property is committing fraud
Appraisal: For all properties financed, the lender will require an appraisal. A third party company gives an opinion as to the value of the house on that specific day. If a property failed to appraise, the lender will not issue a loan unless the buyer and seller come to a different agreement regarding the surplus. For a cash transaction, appraisal can be optional
Title Search: a title company verifies that the seller owns the property and that the title can be transferred to the buyer. The buyer can also purchase a title insurance in the event of future issues.
Closing: also known as settlement date. During this day, all exchanges are made. The buyer provides the fund and the seller provides the Keys. Time to celebrate.