Buying a home is likely the largest financial transaction of your life. As such, it is a good idea to have a basic understanding of the types of documents you will need to deal with when trying to buy property. Three key types of documents you will likely encounter before going through the process include the offer letter, purchase agreement and paperwork from a potential lender.
#1: The offer letter
In some instances, real estate experts encourage the use of an offer letter — also referred to as a “love letter” to the sellers. This letter can explain why you are interested in the property and an attempt to make a personal connection with the seller.
If all goes well, this will lead to the next important set of documents: the purchase agreement.
#2: The purchase agreement
This is the document that holds the details about the purchase. It should include information about both the buyer and seller as well as a detailed description of the property and its condition. Important provisions can also include:
- Closing date. The paperwork should include a closing date and outline of the closing costs and various taxes.
- Disclosures. State and federal laws often require sellers to make disclosures about potential dangers on the property. This can include the presence of lead-based paint or a well on the property.
- Contingency clauses. This can include a need to have the property pass a home inspection, get financing, or close on a home the buyer currently owns before the closing on this new property can move forward.
- Signatures. Like all things in the legal world, the documents are generally not enforceable unless both parties have signed.
This last requirement has become a bit more nuanced in recent years with the increase in deals made through emails or texts. When is a signature really a signature? A recent dispute over this issue was discussed in a previous post, available here.
It is important to review the purchase agreement carefully. You have options if something is missing, worded poorly or otherwise does not look right. You can present your own real estate purchase agreement drafted to your needs or counter the original agreement with edits. Both options better ensure your interests are protected.
#3: Lender requirements
A lender may require additional documents if taking out a mortgage to finance the property. This can include proof of income like pay stubs as well as copies of bank statements and tax returns. The lender may also require a home appraisal and proof of homeowner’s insurance.