Ready to Sign the Purchase Offer for Your House? Here’s How to Read the Fine Print

Do the financing terms match the conditions of the loan?

“Know what kind of financing the buyer is obtaining,” and how many days for the loan approval, advises Paul Fonseca, a top-selling agent in Fort Myers, Florida. Conventional financing differs from FHA (Federal Housing Administration) and VA (Veterans Administration) loans.

Also, look at the financing terms. Let’s say that a contract requires a 10% down payment, but the preapproval for the loan requires 20%. “Basically, the buyer’s not approved for what they want to purchase,” Valdez said. “If they don’t have the other 10%, you may be in hot water. Sometimes buyers don’t even realize they’re not connecting the right dots.”

Which contingencies has the buyer penciled in, and what are the deadlines?

A contingency is a clause in a real estate contract that allows a buyer to rescind their offer if certain conditions are not met.

If the buyer has an FHA loan, contingencies can include additional repairs that the lender requires, Fonseca said. “The banks want to make sure that the buyers aren’t going to walk into a major money pit.”

All contingencies have deadlines, so you’ll want to make sure there isn’t anything unusual about the dates, such as the inspection period dragging out or the buyer having several months to turn in a deposit.

“There are a lot of red flags that sellers can sometimes spot,” Valdez warns. “The contract itself may not say that there’s a sale contingency, but the preapproval letter says that preapproval is contingent on the sale of the buyer’s current property. You want to make sure that the preapproval matches the contract as closely as possible.”

How much is the buyer’s earnest money deposit?

Sometimes called EMD or simply a deposit, the earnest money deposit is cash that the buyer puts down on the property to commit to the sale, usually 1% to 3% of the purchase price.

The deposit may be held by a seller’s brokerage in a trust fund or with an escrow or title company. If the deal finalizes, the money goes toward the down payment and closing costs. But if the buyer doesn’t follow through on their end of the bargain to complete the required steps to closing, then the deposit may be forfeited.

What’s the closing timeline?

Sellers should be aware of the same deadlines facing buyers, so they know what their obligations are — and if the deal still holds.

If a buyer hasn’t had an inspection completed on time, for instance, there’s no obligation on the seller’s part to make any repairs that come up after the fact, unless it’s a requirement by the lender. Sellers should be very clear on the dates and deadlines for:

• Earnest money deposit
• Home inspection period
• Financing approval period
• Closing date

“That’s where I think there’s a big disconnect. Buyers sign the contract electronically sometimes; they probably don’t review it as thoroughly as they should, so they don’t remember exactly what the dates are,” Fonseca says. “A lot of times, buyers are depending on their Realtors to call them every time before there’s something due or something’s going to expire. I know that we’re on top of it, but I’m not sure if everybody’s on top of it.”

Review all the details

While a home’s sale price is often the focal point of a real estate purchase offer, you’ll want to diligently assess every detail — from the buyer’s financing method to the contingencies and associated timelines — so you can avoid unforeseen complications. An experienced real estate agent will guide you through the process, ensuring that when you do sign, it’s with complete confidence.

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