Buying in Yardley & Newtown, Bucks County, how well do you know the contract?

May 19th, 2009 by Marty Millner
Categories: First Time Home Buyers
Comments: Please leave a comment.

So you have taken the plunge, and are out looking at houses. Most first time home buyers that I work with, really enjoy the process of going around and checking out houses. I think it is really important, especially if you have never been through the process before, to look at enough homes, that you become completely comfortable with values in the area that you are looking.

The only way that happens, is to look at houses. The more you see, the more you learn.

So lets say you have looked at enough homes, and you finally see something that you know is the right house for you! What next?

Well, the next step is to sign an offer. I find this to be one of the more stressful experiences in the process. In Pennsylvania, you are going to be presented with a 25 page contract, that is totally binding on all parties, once it is fully executed. In the overwhelming majority of cases, especially with first time home buyers, the first time you see the contract, is when it is put in front of you, and you are asked to sign it. What does it say, and does it protect you?

In an effort to make this process a little less intimidating, I thought it would be helpful to review a few of the more important contingincies in the agreement, so that you can be a bit more familiar with the contract, when you first see it. I also have several tools, that are available, that explain the agreement in detail.

The contingincies that most buyers worry about the most, are as follows:

Mortgage Contingency
Home inspection contingency
Wood destroying insect contingency
Radon contingency
Planned community contingency

Mortgage Contingency

Basically, the contract says that if you are not able to obtain a mortgage according to the terms that you stipulate in the agreement, and at the interest rate you specifiy, then you have the right to void the contract, and your deposit money would be returned.

Home Inspection Contingency

This is probably the area of most concern to buyers. What happens if you find that something is wrong with the house. The answer is, that the purchase of the house is contingent on a home inspection. A building inspector will evaluate all components of the house that he/she can see. That will include, in most cases, walking the roof, checking out the HVAC system, the electrical system, plumbing, etc. The inspection is extremely thorough. Once you receive the home inspection report, generally there are 3 posibilities. The first is that the house is in perfect shape, and you proceed to closing. Secondly, you can decide that there are so many problems with the house, that you just don’t want to deal with them. In that case, you can actually elect to void the contract. Again, in that case, you would get your deposit money back. The third option would be to negotiate something whereby the seller agrees to either fix problems before closing, or agrees to give you a credit so that you can fix them after you move in. In that case, an addendum is added to the contract, reflecting the inspection agreement, and you move on to closing.

Radon Contingency

The contract is contingent on a radon inspection. This works pretty much like the home inspection. Bucks County does have houses with radon levels that are actionable. If the radon test shows actionable levels, then you have the right to either cancel the agreement, or to ask the seller to remediate the radon. If the seller is not willing to do the remediation, you have the right to cancel the agreement, and would again, be entitled to a return of your deposit money.

Wood Destroying Insect Report

Finally, the contract can be contingent on a wood destroying insect report. Once again, this works exactly the same way the other contingencies work, in that if there are wood destroying insects, you have the right to either cancel the agreement, or ask that the seller pay to treat for the wood destroying insects, so that the treatment occurs, prior to closing.

Please note, that there are other contingincies that are sometimes found in the contract, depending on the house you are considering. For example, if you buy a house that has on site septic, and/or a well for water, then the contract may be contingent on a septic inspection and water test. There may also be a contingency that allows you to review and approve planned community rules and regulations, if you are buying in a planned community or condominium neighborhood.

This post is not intended to provide you with legal advice. My point with this post, is to begin to familiarize you with the contract, so that when you get to the point where you are ready for an offer, you won’t be completely intimidated by the contract. As always, if you have other questions, or would like to see a copy of the entire contract, please contact me. In the meantime, please check out the consumers guide to the agreement of sale. I think you will find very worthwhile information in it.

This entry was posted on Tuesday, May 19th, 2009 at 12:43 pm and is filed under First Time Home Buyers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.