Here's Two Essential Clauses That Need To Be In Your Real Estate Sales Contract
The real estate sales contract is one of the most important documents you'll put together when purchasing a home, because it can protect you from losing money if things go south. It can be challenging ensuring the contract covers all your bases, though, and sometimes things are forgotten. However, one thing you want to ensure is included in the document is determining what happens in the event the home is unexpectedly damaged prior to closing. Here are a couple of things you need to negotiate in this area.
Determine Who's Responsible for Making Repairs
In general, when damage occurs to a property prior to closing, the seller would be responsible for making the repairs. However, it may not be possible to do so before the date the sale is set to close. For instance, if a storm comes through and puts a giant hole in the roof a week before the seller is supposed to hand over the keys, it may be tough for them to get a repair company out to fix (or replace) the roof in time.
Thus, you need to stipulate how this type of issue should be handled. For instance, one option would be for you to take on the repair work in exchange for receiving a discount on the home's price or getting a portion of the reimbursement the seller receives from his or her homeowner's insurance company. Alternatively, you could build in a clause that allows you to postpone closing until all the repairs are made, though this will delay your ability to move into the home.
Talk to a real estate attorney to get an idea of what would be reasonable in your particular situation and add the details of what you work out with the seller into the contract. Don't be afraid to be specific or thorough. You want to account for as many issues that may arise as possible.
The Amount of Damage that Allows for a Contract Cancellation
Another thing you need to work out with the seller is the amount and type of damage that will trigger a cancellation option. Sometimes the damage will be so extensive that it will be impossible to move into the house (e.g. completely ravaged by fire). You don't want to be forced to continue with the sale and be stuck having to clean up the mess, especially since your homeowner's insurance policy won't cover the damage since you weren't technically the owner at the time.
Sometimes home inspection or appraisal clauses may offer a way out of the contract in a situation like this, but you don't want to depend on those. Instead, negotiate a separate cancellation trigger that specifically addresses unexpected damage. For example, if the home suffers 10 percent damage due to flooding, you can opt to back out of the sale.
For more information about this issue or help designing a sales contract that fits your needs and preferences, contact a residential real estate attorney.