The Contract will define the details of the transaction and is a binding commitment on the parties. Oral agreements are not binding. There is no “cooling off” period to change your mind, in Virginia, unless specifically provided in the written agreement. Be sure you have carefully inspected the property condition and neighborhood. Check the schools, shopping, taxes, special assessments, homeowner’s association and surrounding zoning. The time to seek legal advice is before, not after, signing.
After signing the contract there is no further negotiation, so be certain you understand and agree to all of its terms. The REALTOR’s Associations developed a standard-form Sales Contract that has gained wide acceptance in the area. The Contract is generally regarded as “fair but tough.” Every word is there for a reason and carries obligations and responsibilities. Every term is also subject to negotiation and change. There is no such thing as a “cookie-cutter” transaction.The REALTOR’s New Homes Sales Contract is not widely used. Most builders have their own Contract and they are notoriously one-sided. There is often no fixed delivery date, the builder reserves the right to change landscaping and materials without notifying you and the contract may not be contingent on your ability to obtain the loan or sell your existing home. Seek legal advice before you sign.
The items that cause most contract misunderstandings are:
- Personal property included in the sale (washer, dryer, chandelier, stove, fireplace inserts, drapes, etc.). The seller can remove anything not permanently attached. If you have any doubt at all, write the item into the contract. Do not rely on the fact the item is listed as being for sale. If it is not in the contract, it is not sold!
- Condition of the property. The standard contract provides the structure conveys in its present condition so you must inspect carefully before signing or hire a professional home inspector and make the contract contingent on acceptance of the report. The latest version of the contract used in most of Northern Virginia contains NO requirement that appliances, heating, air conditioning, plumbing, electrical and mechanical systems be in “normal working order” at the time of settlement. This is a major change from the accepted practices going back over 30 years. You have a choice of accepting the property in its condition on the Contract Date or after a Home Inspection. Obviously you want to choose “after a Home Inspection.” You will conduct a final inspection of these systems shortly before closing and the Seller would be responsible for repairing anything that broke in the interim. You should get estimates and try to resolve any repair issues before coming to the settlement table.
- The division of closing costs including loan charges or points. You will probably have not yet picked a specific loan program, but you should have some idea of the loan discount points. Each point is 1% of the loan amount. If the seller agrees to pay one discount point and your lender charges two, you will have to pay the extra one.
- Arrangements for financing. Most contracts contain a contingency that will cancel the contract if the lender denies your loan or the property does not appraise for a high enough value. You must diligently pursue loan approval and apply for a loan within 5 days of contract ratification or you are in default. Many builder contracts do not contain these contingencies.
- You may apply for financing other than as specified in the contract, but you must obtain a contract addendum signed by the seller or you will waive the financing contingency.
- Set the settlement date and date of possession. Avoid the last few days of the month, if possible. They are the busiest and delays may result.
- If you need to sell a house in order to buy a new one, your contract can be made contingent on the sale of your house but you will need to add contingency language.
- Ask for termite, well, radon, home and septic inspections, if needed, and warranties.
- Consider carefully the choice of settlement agent.