Important Contract Elements

Two of the major components involved in a real estate deal are deposits and disclosures. It is imperative that you have at least some basic understanding of these two elements when becoming involved in the home buying process.

First, you need to understand the basics of what is known as a good faith deposit. This deposit is also known as earnest money and it is the amount of money that you provide to a seller when you make an offer to purchase a piece of real estate. The purpose of this deposit is to demonstrate your willingness to the seller that you are serious about purchasing the property. It is important to keep in mind that until the deal closes the money will still belong to you. Now, typically; the money will be placed in an escrow account and at the conclusion of the real estate transaction the money will be credited toward your closing costs. The amount of money that you are required to pay as earnest money will vary from one location to the next. In some cases, $500 is quite standard while in other areas the amount of earnest money may be tied to the amount of the offer or purchase price.

The contract will contain information regarding what will happen to the earnest money in the event that the contract does not close. In the event that one of your contingencies cannot be met, such as if you are unable to obtain financing, then the money will generally be returned to you. If; however, you back out of the deal without a good reason, then you are typically at serious risk of losing the money and the money will be given to the seller.

Another important element of any contract and real estate transaction is what is known as the property disclosure. The refers to the requirement of the seller to disclose facts regarding the property they are offering for sale. Some of the most important facts regarding a property which sellers are required by law to disclose include lead paint disclosures. Sellers are required to disclose any information they have regarding the presence of lead pain in a home which was built prior to 1978. This is a government requirement, not a local or state requirement. The sellers are also required to provide you with the opportunity to test for the presence of lead paint. Sellers are also required to disclose any information they have regarding any other defects regarding the major systems of the home.

 
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