WALK THROUGH THE CONTRACT: Sellers

As a seller it’s likely that you’re already familiar with the parts of the AR real estate contract from when you purchased your home. However, that may have been a number of years ago.

Every real estate transaction is different – so it’s safe to assume that the buyers who eventually purchase your home will make different requests of you in their offer than you did of the sellers when you bought your home.

Therefore, let’s review the major parts of the residential real estate contract most commonly used in NWA and look specifically at what each section looks like from a seller’s perspective.

Purchaser(s). The buyer will state the name of person(s), business or trust who wish to purchase your property. 

Property Description. The buyer will state the type, address and legal description of your property. You will want to verify that all property information listed is accurate.

Price and Method of Payment. The buyer will tell you the price they are offering for your property and how they plan to pay for the home. 

You will find out here if they are paying cash or financing the home. If they are getting a loan, they will tell you which type of loan. 

Some types of loans can require more of a seller than others so it’s important to evaluate if the type of funding a buyer will use is agreeable to you. 

Agency. The buyer will let you know how each party in the transaction is being represented.  For example, if your agent and the buyer’s agent are from the same firm, different firms, or if party is acting without representation. 

Closing Costs.  The buyer will let you know if they want you to pay for any of their closing costs. Buyer closing costs are fees associated with the purchase of a home and are paid at closing. 

As a seller, you are responsible for paying seller closing costs, in addition to the buyer closings costs you agree to pay (if any). 

Earnest Money. The buyer will let you know if they are offering you earnest money.

Earnest money is a deposit the buyer makes to you as a measure of good faith. Earnest money is generally held by a third party and applied toward the purchase of the sale at closing. Should the contract fall through, the buyer is usually able to get this money back (depending on the terms agreed to in the contract).

If the buyer is offering you earnest money the contract will be accompanied by an Earnest Money Addendum where the buyer will outline the amount of the deposit being given, when the funds will be given, and how the funds will be handled and held throughout the transaction.

Nonrefundable Deposit. The buyer will let you know if they are offering you a nonrefundable deposit.

Nonrefundable deposits are generally given directly to a seller at the time of the offer and applied to the purchase of the sale at closing. However, if the contract falls through due to the fault of the buyer, the funds are kept by the seller (depending on the terms agreed to in the contract).

Title. The buyer will let you know how they want the title search/insurance to be handled and who will pay for it. 

A title search highlights the ownership rights to a piece of property and includes any liens, encumbrances, encroachments, or claims to the property that need to be cleared before the buyer takes possession. Title insurance is a policy that is often purchased to cover any title defects that may be found in the future.

Survey. The buyer will let you know if they want to have the property surveyed prior to closing, and if so, who will pay for it. 

A survey usually refers to a detailed drawing that shows the specific boundary lines of a piece of property. A survey is used to determine the exact amount of land being sold and can include easements and encroachments detailed in the title.

Fixtures and Attached Equipment. The buyer will let you know which items they want you to leave on the property, and which items they wish you to remove. 

Items considered to be real property stay (convey) with the house. Items considered to be personal property are items you will take with you when you move out.  However, if the buyer wants you to leave any items that are considered personal property or remove any items that are considered real property they will let you know here.

Contingencies.  The buyer will let you know if there are any circumstances which make their ability (or desire) to purchase your home conditional. For example, if they need to sell their current home before they can purchase yours. 

The buyer will tell you how long they need to satisfy their contingency and whether they will allow you to consider additional buyer offers (binding with escape clause) while they satisfy their contingency or not (binding without escape clause).

Home Warranty. The buyer will let you know if they want a home warranty, and if so, the monetary value of the warranty and who will pay for it. 

A home warranty is a contract that covers the repair/replacement of various items in a home, like appliances and HVAC systems. 

Inspection. The buyer will let you know if they want to conduct a home inspection. 

A home inspection allows the buyer an opportunity to access your home for the purpose of looking at the property more closely. The buyer may ask you to make repairs to the home as a result of the inspection report. 

Seller Property Disclosure. The buyer will let you know if they wish you to complete a seller’s property disclosure on the property. 

A seller’s property disclosure is an eight page document where you tell the buyer about any defects to the property you are aware of.

Termite. The buyer will let you know if they would like you to provide a termite policy on the home. 

A termite policy refers to a contract with a termite inspection company, usually for the length of one year. The termite company inspects the home prior to closing and reports their findings for the presence of active termites and/or previous termite damage in the home.

Lead Based Paint. It is possible that a home built prior to 1978 could contain lead-based paint. In this part of the contract, the buyer will acknowledge the potential for the presence of lead in the home, if applicable.

Closing date. The buyer will let you know when they want to close on the property. Most closings will be held on a weekday when banks and title companies are open.

Possession. The buyer will let you know when they want to take possession of the house. The options include taking possession the day of closing, before closing or after closing.

If they would like to take possession prior to closing (early occupancy) or after closing (delayed occupancy) the buyer will submit an addendum with their offer that will outline the terms and rental fees for these options.

Other. The buyer will let you know if there are any additional terms they want to be included in the contract that have not already been covered.

Licensee Disclosure. The buyer will let you know if any of the people involved in the sale hold a valid AR real estate license.

Expiration date. The buyer will let you know how long you have to respond to their offer by providing a date and time when the offer expires. Your response to the offer must be received by the buyer’s agent by this date and time. 

Signatures. You will sign and date the contract in this section if you are in agreement to all the terms written in the offer.

If not, you will check whether the offer is rejected or countered and initial accordingly.

Note. The listed items above are parts of the Residential Real Estate Contract that require a box to be checked or have blanks to be filled in. There are many other parts and requirements to the contract that are not discussed here (such as insurance and termination terms, among others). Therefore, for a full picture of the contract buyers should request a blank copy from their agent to review.


Disclaimer. This is not to interpret or give advice on filling in the contract. The contract is a legally binding document drafted by attorneys and all aspects should be considered with care. This article covers the major parts of the contract so you are familiar with the vocabulary and topics covered only. Refer to the contract for specific verbiage and terms pertaining to each of these topics. Also, these topics are subject to change as the forms are regularly updated.

NICOLE BREKELBAUM is the founder & content curator of  NWAREALESTATE.COM where she utilizes her background in education and real estate to provide homebuyers and sellers with resources they can use to make more confident and informed real estate decisions. Nicole is an Executive Broker at Collier & Associates in Fayetteville, AR.

Comments

mood_bad
  • No comments yet.
  • chat
    Add a comment