The Importance of Real Estate Purchase Agreements
Due to the presence of local realtors groups and associations, most Illinoisians have little to worry about regarding the drafting of a real estate purchase agreement for residential or commercial real estate. Quite often, there is a local realtor association that has a template real estate purchase and sale agreement for the area. Nonetheless, it is best to leave forming the terms of your real estate purchase and sale agreement to the professionals. Make sure to contact a realtor and/or attorney.
Title insurance is usually to the benefit of two parties; one being the lender (known as a loan policy) and the second being the new owner of the property (known as an owner’s policy).
Most agreements begin by defining certain terms of the agreement such as “Buyer/Purchaser”, “Seller/Owner”, “Purchase Price”, and sometimes the contact information for the parties and the representatives also appear. After the terms have been defined, some general terms of the agreement are included such as a title commitment, how long Seller is entitled to obtain a survey of the property, and some important representations and warranties that are adopted by the respective parties.
Next, the agreement will usually indicate whether the parties will receive title insurance and more importantly, who pays for the respective title insurance. Title insurance is usually to the benefit of two parties; one being the lender (known as a loan policy) and the second being the new owner of the property (known as an owner’s policy). While an owner’s policy is not always required, it is strongly encouraged due to its low cost compared to the cost of litigating any issues with title. If an owner is refinancing their property, it is likely that the lender will want an updated lender’s policy to secure their interests.
A majority of real estate purchase agreements contain a clause stating whether the buyer is going to obtain a mortgage to the property. Most residential and commercial real estate agreements will require a mortgage, it is more commonly seen in the residential real estate market. A lot of times, businesses will refinance their existing mortgage and “cash out” their existing equity to purchase other properties.
It is highly recommended that when buying/selling real estate that you consider consulting with a realtor and if you have any further questions, consult with an attorney.
Some other important sections to consider in a purchase agreement are sections that lay out the Closing Date, what happens when the parties default, whether the Buyers will provide earnest money, and the applicable law of the state, which is almost always the state where the property is located.
It is highly recommended that when buying/selling real estate that you consider consulting with a realtor and if you have any further questions, consult with an attorney. In Southern Illinois, most closings take place with an escrow agent that is not an attorney. However, everything north of approximately Champaign, it’s common practice for all closings to take place at an attorney’s office.
Purchasing a property is an important decision, albeit a good one. Due to the passive nature of owning real estate, flipping houses and real estate rentals have turned into a lucrative business for many Americans. However, it is very important to recruit a great real estate agent and maybe even an attorney on your side. Our team at Hampleman Law, LLC is familiar with both residential and commercial properties. We have a fee schedule that is simple to understand and completely transparent on all fees that are present. Please contact our office today for an initial, no-cost consultation!