Buying a home is an exciting time, but it can also be stressful and even confusing. With all of the legal documentation, bank information and administrative procedures to coordinate when buying a property, you’re likely to come across a word or two that will leave you scratching your head.
Before you sign on the dotted line, review these five important terms that every buyer should know and understand.
Note: Purchase and sale agreement terminology and practices may vary by region.
Closing date: The closing date, also referred to as the completion date, is the day that the buyer officially becomes the new owner of a property, and all necessary legal and financial parts of the transaction are completed. Typically a couple of days before the closing date, the buyer will sign their mortgage loan and property title documents, and provide the appropriate amount of funds for the remaining down payment and closing costs. The closing date is often, although not always, the same as the possession date, which is the day that the new owner receives the keys to the home.
Deposit: When a buyer submits an offer, they include a deposit worth a percentage of the total purchase price of the property. In most markets, buyers choose to submit a deposit worth approximately 5%, though this can vary depending on market conditions. A deposit demonstrates that the offer is made in good faith by the buyer. The deposit is provided to the seller’s real estate brokerage upon acceptance of the offer and is held in trust until the closing date. The deposit is applied towards the total purchase price.
Irrevocable date and time: When submitting an offer to purchase, there is a limited amount of time for which that offer is available. This is known as the irrevocable date and time. By this specific day and time, both the buying and selling parties are required to sign off on the offer, otherwise, it becomes null and void. An irrevocable date can vary depending on the urgency of the transaction and how much time seems appropriate in each situation for the parties to review the offer’s contents. Usually, it can vary from a couple of hours all the way to 48 to 72 hours from the time that the agreement is submitted.
Chattels and fixtures: When buying a home, how do you know if the curtain rods, stove or garage door opener is included in the sale? The chattels and fixtures section of the purchase and sale agreement will tell you.
Chattels are any items that are considered removable from the property, such as kitchen appliances, curtains and the washer and dryer. A fixture, on the other hand, is permanently attached to the property, such as a built-in microwave, cabinets, a security system or a built-in dishwasher.
When the buying party drafts an offer, it’s important that they clearly state what items they wish to have included in the sale, otherwise, it’s presumed that the previous owner will take any and all chattels with them. Sellers should also request that their broker specify what items are not included in their home’s listing description. Some objects, such as built-ins, outdoor plants and special light fixtures, can fall into a gray area. Disputes between buyers and sellers over what stays and what goes can be time consuming and stressful, so be sure to get your chattels and fixtures in writing.
Clauses and conditions: Each purchase and sale agreement includes a list of assurances that the seller or buyer signs off on, which are known as clauses. Clauses, while important, are not considered to be deal breakers if unfulfilled in the transaction. For example, an offer may include a clause that the seller agrees to leave the property in clean condition upon vacating, or acknowledge that the appliances are in good working order. Conditions, on the other hand, are optional clauses that must be completed within a specific time frame in order for the home to be officially sold. For instance, a home can be sold conditionally upon the professional inspection of the property within five business days of the date of the offer’s acceptance.
It is best to review any terminology of your purchase agreement that you do not understand with your sales representative.