Dear Mr. Gisriel:
I've selected a house that I'd like to buy. I know that to make a binding offer, I'll have to submit and sign a contract to the current owner of the house. Could you suggest some contract contingencies that I should consider?
Dear Mr. Burrell:
The most important principle which you must keep in mind when purchasing real estate is that, in order to be binding, any terms of the contract must be in writing. When in doubt, you must be certain to include a paragraph in the contract which properly reflects the understanding of all parties.
For example, you may believe that you are going to receive the washer and dryer when you purchase the house. However, it may be the seller's intention to remove the washer and dryer. Therefore, in order to eliminate any problems regarding this issue, a provision should be inserted in the contract stating that the washer and dryer will convey with the property.
Generally, most county associations of Realtors will provide a standard form contract of sale for a nominal fee. There are a number of provisions which should be included in your contract, the majority of which will appear in the standard forms.
The contract should be made contingent on your obtaining financing. In other words, if you do not qualify for the designated loan, then you may be entitled to terminate the contract and receive a refund of your deposit.
The contract should state who will be responsible for payment of the various settlement charges. In addition, under Maryland law, the payment of transfer taxes, unless otherwise negotiated, is to be shared equally between the buyer and seller. You should be certain that the contract includes reference to the allocation of hTC transfer taxes.
The contract should state that the title is marketable. Further, in the event that the seller is unable to convey clear title, the contract should provide the purchaser with an opportunity to terminate the transaction and receive a refund of the deposit.
The contract must indicate who will be responsible for the house in the event of damage due to fire or other accidents, mishaps, or acts of God. Generally, it is the seller's responsibility to insure the house until the title is recorded.
Perhaps the most discussed provision of any contract of sale is the "property condition" paragraph. The seller is required to leave the property broom clean; free of debris; and with the electrical, plumbing, heating, air conditioning and other mechanical systems in operating condition. The condition of the property and whether or not the seller is required to give the purchaser a warranty should also be covered.
The contract should provide for a termite inspection. This inspection will reveal whether termites or other wood-boring insects have infested the house. Generally, the purchaser pays the cost of the inspection, which is usually $35 to $75. The seller should pay for the cost of any necessary treatment and/or repair up to a maximum amount, e.g., up to 3 percent of the contract price.
The contract must provide for an anticipated settlement date. It should be understood, however, that, unless the time and date for settlement are declared to be "of the essence," the settlement date is generally an approximation of the time for settlement.
There are other provisions which the purchaser may wish to have included in the contract. For example, the purchaser may want the entire contract to be contingent upon an inspection of the property to determine whether any defects exist in the structure.
The seller may want the contract to be contingent upon the purchaser providing proof that he or she will preliminarily qualify for financing.
The transaction may also be contingent upon the purchaser selling an existing home. This contingency should be specifically delineated in the contract.
Pub Date: 12/08/96