What Are Your Rights Under a Real Estate Purchase Agreement?
When you buy or sell real estate, whether it’s a single-family home, a commercial building or a vacant lot, it’s critical that you understand every aspect of the transaction — your rights, the other party’s rights, the timing of the closing and other key terms. The purpose of a real estate purchase agreement is to set expectations for both the buyer and seller so that there are no surprises and there is as minimal a chance of future conflict as possible.
In Virginia real estate transactions, the purchase agreement must be in writing and signed by both the buyer(s) and the seller(s). Even the most bare-bones agreement will include the offer to buy or sell, the acceptance of that offer, the final sale price, and a thorough description of the property being sold.
Earnest money is normally spelled out. An earnest money deposit, or EMD, is cash that the buyer commits up-front to show the seller this is a serious offer. Depending on the type of property, the EMD is usually around 1 to 2 percent of the purchase price. Once the seller accepts the offer, the earnest money is credited toward the buyer’s down payment and closing costs.
A purchase agreement will usually prescribe conditions under which the buyer can back out of the transaction. The provisions are usually labeled “contingencies.” A common one is that, before the sale can move forward, the buyer must first sell his or her current home. Other common contingencies include home appraisals, home inspections, and loan approval. If any of these falls through, the transaction can be called off.
If the transaction breaks down for a reason that is not in the agreement, then the seller will most likely get to keep the earnest money. So, a buyer who simply gets cold feet and wants to back out can do so, but will lose a significant amount of money.
The settlement date, more commonly called the closing date, is another aspect of the purchase agreement. This is the date when all parties, including the title company and lender, agree to make the sale official. The closing usually happens in person for the buyer at the buyer’s attorney’s office or the title company’s office, but it is also possible to do the closing remotely through the use of technology if all parties are equipped to do so. Sellers usually do not need to attend closings.
It is critical that you arrange a settlement date that allows ample time for inspections, appraisals and other steps to be completed beforehand. If you don’t meet your obligations as outlined in the purchase agreement by the time the settlement date rolls around, you could be considered in default and lose money.
It is essential to have a purchase agreement drafted or reviewed by a qualified real estate lawyer before moving ahead with any property deal. The experienced Charlottesville attorneys at Miller Law Group, P.C., would be happy to assist. Call 434-218-3987 or contact us online to schedule a free appointment.