Never Miss a Deal Again with Solid Real Estate Sales Contracts

Real estate is a big business. Sure, the times are tough out there – home prices haven’t seemed to recover, and a lot of people are nervous about real estate. But in tough times, the necessity for a good real estate sales contract is even more apparent. You do, after all, want to keep the money you earn from these sales without any legal quibble or hassle.

That’s the goal of a real estate sales contract, of course – to make the agreement ironclad so that it will stand up in a court of law. Of course, any legal form that is this ironclad will discourage bad behavior, which is exactly what you want. But let’s dig a little deeper into the world of real estate sales contracts and see how you can make the most of the ones you download here at FindLegalForms.com.

Understanding the Real Estate Transaction

For many of us, the home we buy is one of the most valuable investments we’ll ever make. Whether or not you get a good return on that investment is up to a few factors, such as:

• The market: the market of house prices is really one of the main determining factors as to the price of your home – other than the quality and location of the home itself. You’ll want to keep in tuned with the market and stick to the classic “buy low and sell high” model. If you’ve been paying attention, that means that right now is one of the best times to buy some real estate, as long as you have the patience to ride out a recession.
• The quality of your transaction: Not only is it important that you make a good purchase or sale on your real estate, but it’s important that you have the legal forms to back your strategy up. You want to put the agreement in writing so that neither party can go back on it, and so the terms of the transaction (and change of ownership) itself is put in clear writing. These clear plans make it easier on both parties to do business, and easy business is generally good business.

Of course, what actually goes into a real estate sale contract might still elude you. So let’s close in on some more of those details and explain what the form is all about.

The Real Estate Sales Contract

Quite simply, this type of contract is an agreement between two people for the transaction of real estate. Two parties are usually involved – the buyer(s) and the seller(s), although the transaction form can really refer to both parties as anything it likes, provided those terms are defined at the top of the contract.

This contract will include certain necessary details like the price to be paid for the real estate, the location of the real estate, and how the transaction is to occur. If you want to make sure your real estate transaction goes smoothly, we encourage you to check out one of our sales forms.

Who are the Participants in the Home Buying Process

The typical parties who will be instrumental in the purchase or sell of a home include:

• Lender: A bank or mortgage company which provides the funds for the purchase of a home.

• Buyer: A person purchasing a home. The buyer may search for a home with or without the help of a real estate agent (a buyer’s agent or seller’s agent).

• Seller: A person selling a home. The seller usually works closely with a real estate agent to sell his/her home.

• Real Estate Agent: There are two types of real estate agents. Either real estate agent may be a certified realtor or a lawyer specializing in real estate: (i) Selling Agent: A person who earns a commission on the sale of a home from the seller; (ii) Buyer’s Agent: A person who earns a commission on the purchase of a home from the buyer.

• Home Inspector: A real estate professional who inspects a home prior to settlement day. The final result is a report detailing the condition of the house.

• Home Appraiser: a real estate professional who sets a dollar value for a home’s worth, using standard appraisal criteria. The appraisal is one of the important documents required at closing. **

How Much Home Can You Afford?

Lenders will review your income, debt, and savings information to determine how much money they are willing to lend you towards your home purchase. Lenders will provide you with an estimate on how much you can qualify to spend toward the purchase of a home. This estimate is the maximum amount that the lender is willing to lend you. Based on your lifestyle and needs, you should consider how much you are willing to spend on the purchase of a home. In some cases, the home buyer is not willing to invest as much of their income toward a house as he or she can actually afford. Below are further details about the kinds of information used to determine how much you can afford, namely income, debt, and housing-related expenses.

1. Income: Your income will be critical in computing how much you can afford to pay (using current lending guidelines) for housing-related expenses. Your income information is included in the PITI (Principal, Interest, Taxes, and Insurance) and PITIO debt ratio (PITI and other debt) calculations. Your ability to meet the PITI, or front-end ratio, and the PITIO ratio, or debt ratio, can have an impact on a lender’s decision to offer you a loan. Different loan programs have their own rules regarding the percent- age of income that can be applied toward monthly house payments. For example, government loan programs such as FHA and VA have ratios that allow you to apply a higher percentage of your income toward the loan. While conventional loan front-end ratios generally run around 28 percent, FHA allows you to apply 29 percent and VA allows you to apply 41 percent. Basically, this means that your monthly loan payment should be no more than 28 percent, 29 percent, or 41 percent of total monthly income, depending on the loan program.

2. Debt: A lender carefully considers your debt information when it assesses your ability to repay a loan. Your debt information is included in the PITIO, or debt ratio calculation. Loan programs have different rules regarding the percentage of income that can apply towards long-term debt. Your ability to meet the ratio requirements can affect a lender’s decision to offer you a loan. Government loan programs such as FHA and VA allow you to apply a higher percentage of your debt requirements towards the loan. While conventional loan debt ratios generally run around 36 percent, FHA and VA al- low you to apply 41 percent. Basically, this means that your long-term monthly debt payment plus your monthly loan payment can equal no more than 36 percent or 41 percent of total monthly income, depending on the loan program.

3. Housing-Related Expenses: Housing-related expenses are another category that lenders consider. These expenses often depend on the location and type of home. This will influence the amount of the loan for which you can qualify and may be one of the most critical factors in your decision to buy a home. You should consider how hous- ing-related expenses could affect your budget. The purchase of a home may increase your monthly expenses and reduce the amount of money you have remaining to support your lifestyle. Typical home expenses include:

4. Property tax: This expense is dependent on the location of the home. Different counties and states have different property tax requirements. As a home buyer, you would be wise to consider how this additional expense will impact your total monthly expenses.

5. Maintenance costs: This expense includes anything from washers in the faucets to a new roof or heating system and varies by the geographic location, size, and age of a home.

6. Utility costs: This expense includes items such as electric, gas, water, and heating and air conditioning, and varies by geographic location, size, season, and age of a home. The type of construction (i.e. gas, electric) may also be a factor in your utility cost estimates.

7. Mortgage insurance (if applicable): This expense can vary by mortgage insurance company, lender, type of loan, and loan-to-value percentage of the loan.

8. Other Costs: These expenses vary depending on the type of home and geographic location. These costs can include: homeowner association fees; flood insurance; other required property insurance; condominium assessment fees; and other condominium escrow items.

It usually takes a lender between 1-6 weeks to complete the evaluation of your loan application. It’s not unusual for the lender to ask for more information once the loan application has been submitted. The sooner you can provide the information, the faster your loan application will be processed. Once all the information has been verified, the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing with you. After closing, you’ll be able to move into your new home. **