Your escrow officer or closing agent will refer to three main documents to act as the roadmap to prepare your purchase transaction for closing. Those three documents will be the Purchase Agreement or contract between Buyer and Seller, the title commitment or abstract of title, and the lender’s closing instructions.
The Purchase Agreement will reveal the Who, What, Where, When and How of your transaction. It will list who the Buyers and Sellers are and which Real Estate Agents are involved and the amount of commission due each agent. It will state the name of your lender, if that is known at the time the agreement is given to the escrow officer, and it may list the name of the title or escrow company who will handle the closing.
The Purchase Agreement will next spell out the What of the transaction by describing the legal description of the property and listing any personal property items which will be involved in the sale. The property address will identify the where portion of the purchase. The date of acceptance of your purchase offer, the date when the evidence of title must be delivered, the date a loan approval must be made, the closing date, and the date for making prorations fulfill the when requirement of your closing and make clear the specific dates when events must occur.
The terms of the transaction will explain the how aspects of your closing. The purchase price, downpayment made, loan amount, terms of the financing, the balance due at closing and any contingencies to the contract will all be listed in the purchase agreement.
Who the current lender is and the loan number may be outlined in the Purchase Agreement. Who will hold the downpayment or earnest money is listed. This may be either the sales agent, title company, or a third-party. Who will pay for what costs involved in the transaction will be listed. Such fees as recording fees, title insurance, survey, termite report and inspections fees will be spelled out. Who will pay for the real estate commission, loan costs and any other miscellaneous fees will be detailed. Further specifics of how your escrow will be closed will explain who is responsible for ordering such services as a survey, termite report, and roof or structural inspections.
The final portion of the purchase agreement will tell the escrow officer what will happen if certain events were to take place. These occurrences could be the buyer not being able to obtain financing, one or the other party defaulting on the contract, the seller not being able to transfer clear title, the purchase not closing on the agreed closing date, or termite or other inspections showing damage that the Buyer is unwilling to accept.
You may wonder what happens if one of the parties to the transaction have special requirements which are not covered in the pre-printed Purchase Agreement form. When the Buyer, Seller, Lender or other party to the purchase needs to make a change or needs to change the language to the contract, they may choose to attach a separate addendum or addition to the contract to provide for these special requirements. When changes are made to the contract, these changes should be initialed by all parties to the contract. Any changes made to the instructions to your closing agent will need to be agreed upon between all parties to the contract and their acceptance evidenced in writing. Keep in mind that any typewritten or handwritten provisions added into the contract or attached to it by way of an addendum will supersede the pre-printed language in the contract.
Can the terms of the Purchase Agreement be changed after they are signed?
Often a case may arise in which one or more of the terms in the Purchase Agreement must be changed. Once submitted into escrow, the Purchase Agreement is the over riding document which specifies the terms of the sale. In order to make a change, or add to this agreement, an addendum can be prepared and signed by both Buyer and Seller. The closing date may need to be revised, acceptance of certain inspection reports may need changing, or financing contingencies may need to be modified. As long as both parties to the agreement mutually consent to the modification, the Purchase Agreement can be changed.
What is a contingency?
A contingency is a clause written into the Purchase Agreement which allows either the Buyer or Seller to cancel the agreement, unless certain events take place. The most common contingency is a financing contingency, which allows the Buyer a specified number of days in which to find acceptable financing. Inspection contingencies are common, giving the Buyer an opportunity to approve or disapprove a building inspection or other inspection reports. There are a number of common contingencies, such as the Seller being able to provide clear title to the Buyer, which are written into every Purchase Agreement. As each contingency is removed, written verification is sent to the closing agent, who adds it to the escrow file. Contingencies generally hold time limits to perform a task, which then requires approval or removal.
Copyright © 2001, 2004 Sandy Gadow. This column may not be resold, reprinted, resyndicated or redistributed without the written permission from Escrow Publishing Company.