Whether you are buying or selling your home you should have a basic understanding of the following terms:
Offer: A formal bid from the real estate buyer to the real estate owner to purchase the real estate. The offer is made in writing (and should be for it to be valid) and typically in the format of a form contract like the Multi-Board Residential Real Estate Contract 6.0.
Contingency: A contingency is a future event that is not certain to occur. A contingency in a real estate transaction allows one party to cancel the transaction, usually without any penalty. There are three typical contingency clauses in most real estate contracts: An appraisal contingency, a mortgage contingency and a sale contingency. An appraisal contingency allows a buyer to cancel the contract if the real estate appraises for less than the sales price. A mortgage contingency allows the buyer, and in some contracts the seller, to cancel the contract if the buyer cannot get approved for a mortgage loan to purchase the real estate. A sale contingency allows the buyer to cancel the contract to purchase real estate if the buyer’s owned real estate does not sell by a certain date.
Closing: The process of completing the purchase and sale transaction which typically occurs at a title company office. The title company typically acts as an escrow agent for the parties, a process by which the parties deliver legal documents to the title company, which completes the transaction in accordance with the parties’ and the lender’s instructions.
In most cases, several people are present at the closing including, the buyer(s), seller(s), the listing agent, buyer’s agent, lender’s representative, buyer(s)’ attorney and seller(s)’ attorney and the title company’s escrow officer or ‘closer’ as they are sometimes called. A buyer who finances the purchase will review and sign the mortgage loan documents and the lender will approve the disbursement of funds. The seller will tender the title documents and the parties will sign various other transfer documents.
Proration: The amount a buyer and seller may have to pay to each other at closing for real estate taxes, homeowner’s assessments or other fees that are either pre-paid by the seller or due at a date after closing. For example, Cook County property tax bills are come out and are due the following year for the current year. Therefore you should make sure that you prorate the property taxes in a way that ensures each party pays, or is credited, their fair share.
Attorney Modification Clause: This is another contingency in a real estate contract to allow an attorney for each party to approve or disapprove, suggest modifications to a real estate contract. This is something you should always make sure is included in a contract to protect your interests.
Inspection Clause: This is another contingency in a real estate contract to allow you to have a professional inspector inspect the real estate in order for a buyer to understand the potential problems that exist with the real estate.
When you are dealing with such large financial transactions, you should definitely have an attorney who represents your interests. We have helped hundreds of clients like you and we have very reasonable rates! Give the experienced closing attorneys at the Integrity Law Group, LLC a call today at 773-278-9200.