Successfully buying a home means navigating a sea of paperwork and regulations. A home contract is one of the longest commitments you will ever make, involving a financial obligation of 20 to 30 years or more, and even the most informed of home buyers can end up overwhelmed.
Protect yourself from the unexpected by knowing every detail of your purchase.
1. When Buying a Home, Know What Else is Included
Both buyers and sellers find room for negotiation through items like appliances, window treatments and even outdoor furniture. Strictly speaking, anything attached to the dwelling permanently, such as kitchen appliances and plumbing fixtures, is assumed to be part of the purchase unless the seller states otherwise in the contract. The dwelling’s purchase price includes these items.
If you become interested in additional items not installed — furniture, for example — you may ask that they be included. The home’s current owner has final say, and may request a price adjustment to compensate. The buyer, on the other hand, can require inclusions as a condition of meeting the asking price. Be prepared to negotiate these details, and confirm everything in writing.
2. Be Sure Your Home Contract Defines All Financial Responsibilities
The number of hidden costs when buying a home vary, but count on running into at least one or two unexpected issues. Not only do the mortgage, taxes and commission need to be accounted for, but inspections, title searches and filing fees all carry associated costs. Your contract should always spell out where the financial responsibility for each individual item rests.
3 . Know Your Financing Options
Pre-secured financing gives you a sense of confidence during your house hunt, but these agreements can fall through, and that isn’t the only pitfall you need to look out for. Watch for certain phrases in your contract. For instance, a statement that you agree to purchase the dwelling, "at the prevailing rate of interest," may lock you into a larger-than-expected house payment. Worse, you could end up obligated to buy the house even if your financing falls through.
To protect yourself, insist on a mortgage escape clause and state the maximum interest rate you are willing to pay in the contract. The language, "not to exceed," followed by the determined percentage safeguards you from being caught off-balance by payments that outstrip your means.
4. Additional Costs Sometimes Catch Home Buyers by Surprise
Most home contracts specify a percentage-based down payment due at the time of sale, but the seller may also ask for "earnest money" before accepting the contract and beginning the process. The home’s price dictates the size of these deposits, but "earnest money" is usually at least a few thousand dollars, while the down payment is significantly more. Willingness to meet these early financial obligations reinforces your commitment.
5. Read Every Word Before You Sign
Reading a home contract in its entirety seems overwhelming, but it is the single most important thing you can do. While sellers who fail to live up to the specified terms risk breach of contract, the same is true for home buyers. If you take the time to read and fully understand each document you sign you can not only protect yourself, but be informed of the seller’s obligations as well.