1. When buying a home, understanding your contract
is one of the most important protections you have
to ensure you make an informed decision.
As with everything else about real estate, sales
contracts or purchase agreements vary from state
to state -- and even by real estate company in
some places. Variations in regulations place even
greater emphasis on working with professionals
with local knowledge.
While the terms used may change from place to
place, there are seven common terms that are
particularly important for you to understand.
1. Buyer cost sheet. Technically, this sheet is not
part of the purchase contract, but it's still
important.
A property purchase agreement can range from a
few pages to a dozen or more, depending on your
location and the complexity of the transaction.
Buyers need to focus closely on the buyer cost
sheet, sometimes called "cash to close."
The buyer cost sheet -- typically generated by
your lender but sometimes given to you by a
Realtor -- should include everything you will be
responsible for paying when you buy a home.
Items included on a buyer cost sheet may
include:
Ÿ Inspection fees
Ÿ Appraisal fee
Ÿ Transfer fees
Ÿ Down payment
Ÿ Closing costs
Prepaid items such as prorated property taxes,
homeowner's insurance and homeowner's
association dues.
Steve Yeager, an assistant manager with Weichert
Realtors in Upland, Calif., says, "Some of those
costs, especially the closing costs, may be paid by
the seller after negotiations take place, but
buyers need to have the entire cost of the
transaction laid out for them to make sure they
have the funds to buy the home."
2. Commission authorization. Realtor
commissions for both the listing agent and your
buyer's agent are negotiable and are generally
paid from the proceeds of the sale by the seller.
3. Contingency. A contingency is a clause in a
contract that expressly sets the conditions under
which the contract can be voided and the deposit
returned to the buyer. Morgan Knull, an associate
broker with Re/Max Gateway in Washington, D.C.,
says the most common contingencies are for
home financing and a home inspection.
"In the Washington area, contracts also have a
contingency based on the review of condominium
or homeowner association documents so that
buyers can cancel the contract if they are
unhappy with the information in the documents,"
says Knull.
CONTINUED ON BACK…
Terms Every
Homebuyer
Should Know
Please note that the information contained herein is for general informational purposes only. If you are currently
involved in a real estate transaction, please direct your questions to your real estate professional, title officer or closing
officer.
For more information on this publications please see www.hsh.com and its original article written by Michele Lerner.

2. According to Tony Geraci, a broker and owner of
Century 21 HomeStar in Highland Heights, Ohio,
buyers typically have 30 days after the contract is
agreed on to have a signed financing agreement in
place from a lender. Home inspections usually
must take place within seven business days in
Ohio, with any cancellation of the contract or
negotiations to take place within three days after
the inspection.
Contingencies are negotiable. So if you believe you
need more time for an inspection or to obtain
financing, you can write that into your offer.
4. Disclosure/disclaimer. Rules vary from state to
state about what homeowners need to disclose to
potential buyers, but most states require sellers to
complete a form that tells buyers what they know
about their property.
"In California, sellers must disclose anything that
affects the 'value and desirability' of the property,"
says Yeager, who adds that "California is known as
the 'nanny state.'"
California sellers must disclose information
such as whether they live:
Ÿ In an area prone to fires
Ÿ On an earthquake fault zone
Ÿ Within hearing of an airport
Ÿ In an area with a flood hazard
Geraci says that in Ohio, only sellers who live in
the property must disclose anything they know
that could impact the buyers' decision to buy.
"Estate sales and investors are not required to
disclose what they know," says Geraci. "But I
always tell all sellers they should share everything
they know with buyers."
5. Earnest money deposit. Buyers usually attach
a check for their earnest money deposit to their
offer. The check is put into escrow once the
contract has been approved by all parties and is
used as part of the down payment at settlement.
"The size of the deposit varies according to the
size of the down payment, the price point of the
property, the neighborhood and local
expectations," says Knull.
6. Escrow. Escrow is handled by a title company,
an escrow company, an attorney or a real estate
broker, depending on local practices. An escrow
account includes the buyer's deposit and all the
financial portions of the purchase transaction
before, during and after the settlement.
"The escrow company will pay off all the liens on
the property after settlement and will record the
transaction at the local courthouse or county
office," says Geraci.
The term escrow also refers to prepaid amounts
for homeowner's insurance and property taxes that
you pay with your mortgage bill each month. Your
lender will keep these funds in an escrow account
until the bills are due.
7. Good faith estimate. Like the buyer cost
sheet, the good faith estimate technically is not
part of the purchase contract, but is still
important.
"The good faith estimate has a twofold purpose,"
says Knull. "It gives buyers a snapshot of their
estimated costs for closing services, the down
payment and prepaid items like homeowner's
association dues, homeowner's insurance and
property taxes. In addition, buyers can use the
estimate to hold their lenders to the amount
promised in certain categories of costs."
Also included in the good faith estimate are the
Title and Escrow Fees**
Geraci stresses the importance of buyers looking
at the good faith estimate as soon as possible so
they understand how much they will need at
closing.
"Some buyers may see that estimate and realize
they need to save more before they can buy a
home," says Geraci.
…CONTINUED FROM FRONT.
Please note that the information contained herein is for general informational purposes only. If you are currently
involved in a real estate transaction, please direct your questions to your real estate professional, title officer or closing
officer.
For more information on this publications please see www.hsh.com and its original article written by Michele Lerner.
**Your title officer can provide you with more information on how Title and Escrow work for you on your transaction.
Esther Marquez
BRE #01844515
Broker Associate
EstherMarquez@REMAX.net
951-543-5843 Direct
951-801-5878 Office
951-813-2572 Fax