The Contract Document

There are several clauses in the contract document that the buyer needs to consider when making an offer in addition the asking price. The following numbers refer to the line numbers in the most commonly used contract, the FAR/BAR Contract for Sale and Purchase. There is an alternative form of contract, called the 'As-Is Contract', which is commonly used for distressed and bank-owned sales. This has similar clauses, but the line numbering is different. Also, the equivalent of line 91 (seller contribution to repairs) is deleted in the As-Is contract.

Line 1 should contain the names of the buyer(s) as they will appear on the title deed.

Line 12 may include a reference to any furniture, furnishings and housewares that are to be included in the sale, but these may appear separately in an addendum.

Line 16 is the offer price, and line 17 is the amount of good faith deposit offered by the buyer. The rest of this section is filled as appropriate, depending on whether a mortgage is to be obtained. Line 19, an additional escrow deposit, is seldom used.

Line 27 defines the time allowed for acceptance or a counter-offer. If either or both parties are overseas, then a more generous timescale should be set.

Line 33, the financing contingency clause, should be discussed with the buyer's agent to make sure that it is completed in such a way that it protects the buyer in the case of a failure to obtain acceptable financing.

Line 53, it is usual for the seller to provide and pay for title insurance.

Line 56 sets the timescale of the contract and the closing date of the transaction. This should be discussed with the buyer's agent to make sure enough time is allowed to close, especially if financing is required. After the date entered here the contract becomes void unless it is extended in writing by both parties.

Line 91 sets the maximum amount that the seller will be required to pay to fix any problems identified in the home inspection. Sellers will not usually allow this to remain at the default amount of 1.5% of the contract price, which is high for most recently built homes. $500 to $2000 should be adequate.

Line 95 allows the buyer to request that the seller provide and pay for a home warranty to cover unexpected expenses in the first year after purchase. The seller may of course decline to accept this, in which case the buyer may want to pay for this himself.

Line 97 allows for specific documents to be appended to the contract, of which the homeowners or condominium association documents are the most important.

Line 100 may be used to add any special clauses, such as a requirement for the seller to pay some or all of the buyer's closing costs, or to include advance rental bookings in the transaction. Alternatively, these may appear separately in an addendum.

Finally, don't pass over the small print on pages 3 and 4. There is a lot of important information in these sections that the buyer needs to be aware of before signing the contract.

When you are sure that you understand and agree with everything, that is the time to put your signature(s) to the contract.

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