Things to Look Out for in a Contract
- Check the spelling of your name to make sure that it is correct.
- Make sure that the contract contains both the street address and an accurate legal description of the property you are buying. (A tax collector’s folio number is NOT a legal description.)
- Make sure that the deposit that you put down is small enough that you can afford to lose it if problems develop with the deal and that it is held in a real estate broker’s escrow account.
- Make sure that the contract gives you a reasonable amount of time to have the property inspected and to get a mortgage commitment.
- Make sure that the contract contains a “mortgage contingency.” This is a provision in a contract that says that if you are not able to get a mortgage to purchase the property, you are able to get your deposit back. Some of the pre-printed standard form contracts severely limit the rights of the buyer to get back deposits. You should insist on a mortgage contingency provision that has no limits on your rights to receive a refund of your deposit if the mortgage lender backs out of the deal.
- If the contract provides for mediation and arbitration instead of litigation to resolve disputes, it will be very difficult for you to protect yourself if the seller decides to sell the property to someone else. You should delete the provisions calling for arbitration.
- Make sure that the contract provides that the winner in any litigation or arbitration is entitled to recover attorneys’ fees.
- What the contract says is what the contract really means. If someone tells you that a provision of a contract is just “boilerplate” that does not really mean what it says, do not believe it and check with an attorney.
- The written contract should contain everything that is important to the deal. Verbal promises of the seller or the real estate agent probably cannot be enforced.