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Month: April 2015

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Boilerplate Real Estate Contracts are Not One-Property-Fits-All

 

 

Boilerplate Real Estate Contracts are Not One-Property-Fits-All

Whether you’re buying, selling or renting a home, all real estate transactions begin with the signing of a contract. This legal document is necessary for outlining the essential terms of the agreement as well as the rights and obligations of the parties involved. Unfortunately, generic forms in real estate deals are all too common these days—and not just when selling or purchasing For Sale by Owner properties. These boilerplate contracts can lead to massive headaches should your real estate arrangement go awry.

Most sources of generic real estate contracts do not tailor them to your state. Every state has its own real estate contract and disclosure laws. Use a boilerplate contract template that does not take your state’s particular rules into account and a judge could declare it null and void, or your buyer’s lawyer find it full of exploitable loopholes, should the deal eventually land you in court.

Most boilerplate real estate contracts only cover the most basic issues. Because a lawyer did not compose it to address your transaction, it’s likely a generic contract will fail to cover some of the details essential in your situation. For example, a purchase offer template may not include a mortgage contingency—a must have in a tight financing environment—that would allow you to back out of the deal and reclaim your earnest money deposit should you be unable to secure an affordable loan within a set period.

Generic real estate contracts rarely cover all the appropriate elements of a specific deal. When dealing with legal documents, even small differences in wording can have big consequences in the outcome of an agreement. For example, a contract for a lease with an option to buy is very different from that of a lease with the right of first refusal. In the first, the renter may purchase the property for an agreed upon price within a set period. In the second, the seller must offer the renter an opportunity to purchase the property under the same terms suggested by a third-party buyer.

Boilerplate real estate contracts are not one-property-fits-all. Different property types—like apartments, condominiums and townhouses—may require different contracts. For example, when buying or selling a condo, an agreement that includes the specific rules and policies of the building, as well as how its association operates and governs it, is necessary.

Anyone can easily find generic real estate contracts online. However, they were not written to protect your interests, were most likely not drafted by real estate specialists, and they won’t include the essentials necessary to prevent costly legal problems. It’s better to find a trusted advisor—such as a lawyer, real estate agent or both—who can help you review your options and craft a contract that properly protects you from potential pitfalls. Upfront legal costs are a small price to pay for the protection a solid contract offers.

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Five Ways to Find Your Down Payment

Five Ways to Find Your Down Payment

What’s the hardest part of the process for anyone preparing to buy a home? According to many in the real estate industry, it’s saving up a down payment. In fact, the National Association of Realtors and RealtyTrac have reported that at the rate Americans generally save, first-time homebuyers have to spend an average of 12.5 years amassing their 20 percent upfront investment. While you can buy a home with less—such as 3.5 percent down through the FHA, for example—you’ll pay a penalty in private mortgage insurance and, often, higher interest rates.

Fortunately, there are ways to save up faster and even find alternative sources of cash. Give these a try and 20 percent down may no longer seem like that large of an obstacle.

1. Find a Down Payment Assistance Program

According to RealtyTrac, 87 percent of U.S. homes qualify for down payment help, and there are more than 2,290 down payment assistance programs across the nation. You can start your search at Down Payment Resource, a website that connects homebuyers with down payment assistance opportunities. Use their online program finder to explore your eligibility. You can also check out your state’s housing authority website for a list of programs and participating lenders. Not all lenders participate in down payment assistance programs.

2. Make Saving for a Down Payment Automatic

Instead of waiting until the end of the month to see what you have left over to save for a down payment, schedule automated contributions to your designated savings account. It’s a lot easier—and less painful—to save when you budget accordingly and pull contributions from your checking account weekly, bimonthly or monthly. You can schedule transfers through your bank or ask your employer about your direct deposit options. Some give you the ability to divide and deposit your paychecks into multiple accounts.

3. Stash Extra Cash

Did you just win $50 on a lottery scratch ticket? Put it in your down payment savings account. Did your employer give you a 5 percent raise this year? Schedule an additional 5 percent of each paycheck for transfer into your down payment savings account. You get the idea; any extra cash that comes your way—from tax refunds and work bonuses to yard sale profits and inheritances—goes into your down payment savings account before you’re tempted to spend it on anything else.

4. Ask Your Family for Help

Most lenders will allow you to use cash gifts from family to cover at least a portion of your down payment. As of 2014, conventional mortgages generally allow you to use gift funds for your entire down payment as long as you’re putting down 20 percent or more of the purchase price. If you’re putting down less than 20 percent, part of the money can be from gifts, but part must come from your own earnings as well. The exact contribution limits vary by loan type. FHA and VA loans allow for gift assistance on the entire down payment provided your credit score is 620 or above.

5. Talk to Your Employer

Some employers offer mortgage assistance programs to their workers. Talk to your human resources department about the options—from down payment assistance to low-interest mortgages—that may be available to you. If you’re in the market for a new job, you might even be able to request down payment assistance as a signing or relocation bonus.

Anything worth doing is worth doing right, and for many, that means buying a home with 20 percent down. Whatever your real estate plans, please don’t hesitate to give us a call for further insight. We look forward to assisting you soon.