Whether you’re purchasing a house, a commercial plot, a tract of land, or any other kind of real estate, odds are that the state you live in will require you to form a written agreement between the purchaser and the buyer. The reasoning is that real estate purchases are generally more complex than most other purchases, and with the large amounts of money involved it is both sensible and beneficial for state legislatures to require a written real estate purchase agreement. But what should be in a real estate purchase agreement? And what should you be aware of when you sign a real estate purchase agreement?
Most commercial or residential real estate purchase agreements will (or should) include a clause stating that the person who is purchasing the property is purchasing it as-is. Generally, when you purchase property, before you even decide to buy you should hire an inspector to look over the home and see if there are any irregularities with the building or any structural defects that could lead to problems down the line. Say you’re purchasing a home with the intent to raise a child there with your spouse, and the home inspector you hire has found lead paint. It is incredibly unsafe for a small child or toddler to be in a home with lead paint, as small children and toddlers are known to chew on anything within reach and that could include the walls or errant chipped paint. Knowing that, you decide that you do not wish to purchase the home. But the seller, understanding your concerns, offers to pay for lead paint removal and repainting the walls. You agree that, on the condition that the seller fixes the issue, you will purchase the home. The seller hires a contractor who removes the paint and repaints the walls with lead free paint, and you sign an agreement that says you purchase the property as-is. Then, a month after you purchase the home, you decide to call an inspector again just to make sure everything is still up to code when you find out that several rooms still have lead paint, one of them being the nursery! Your first thought might be to sue the homeowner, but because you agreed to purchase the home as-is, there might not be much you can do about it. You were aware of the issue, and you both agreed that the contractor had done their job and removed the paint. At this point, your best bet might be to sue the contractor who misrepresented their work. Understanding the as-is clause and how it affects the purchase is essential for a real estate purchase agreement.
Not as common, perhaps, but no less important is an arbitration agreement. An arbitration agreement is an agreement between the buyer and seller that if any issues should arise from the real estate purchase agreement, that it will be addressed in arbitration. The clause is common in many contracts, including construction contracts. Generally, the arbitration clause will specify what laws apply (for example, a Virginia real estate purchase agreement would likely use Virginia law) but rather than going to court, the parties will instead use a not-for-profit like the American Arbitration Association to go before an arbiter with their disagreement instead of a judge.
There are many aspects to a real estate purchase agreement which can be confusing or which have drastic consequences for the buyer or seller. For an opinion on a real estate purchase agreement you have been offered, or to draft one, please be sure to contact a lawyer, like one at Mughal Law Firm, PLLC, today.