The fact that your offer to purchase contract is legally binding can get lost in the excitement of buying a home. But this contract – and the details in it – can end up costing you. We’ve seen this happen to clients time and time again, so we’ve put together a list of the most common misunderstandings about Wisconsin offer to purchase contracts so you can be prepared and protected during the home buying process.
Buying your first home? Read our first-time Wisconsin homebuyer guide for more information.
What is an offer to purchase contract?
An offer to purchase contract details the agreement between the buyer and seller, and is signed to signify the intention of both parties to move forward with the sale.
The contract usually includes:
- The price
- Time-sensitive terms (like appraisal and inspection)
- Property details
- A general timeframe for transitioning ownership.
Offer to purchase contracts aren’t ongoing – they have an expiration date, which is included to motivate the buyer and seller to move the deal along.
1. If I back out of the contract, I’ll only lose earnest money.
Many homebuyers think, if they back out of the contract, all they’re risking is earnest money, and the broker holding the earnest money will give it back if (for example) the buyer gives notice to the seller of a defect based on a home inspection. (This is just an example.)
Reality: According to line 378 of the WB-11 Wisconsin Residential Offer to Purchase Contract, if this offer does not close, the earnest money is distributed according to the disbursement agreement that both the buyer and seller sign called the Consent and Mutual Release.
If the buyer just gets cold feet and backs out, the seller also may sue for specific performance and damages.
2. If my home inspector finds something suspicious, like mold, they’ll test it.
Contrary to popular belief, home inspectors can’t just take samples during an inspection, even if they’re licensed for performing tests.
Reality: There is a difference between an inspection and a test, and according to line 398 of the purchase contract, the home inspector can only test if the agent specifically included testing in the inspection. If testing isn’t included, you’ll need to opt for additional services.
Offer to Purchase contracts require crystal-clear writing — find out what to avoid saying on your purchase contract.
3. Additional inspection services, like mold or asbestos testing, need to be done within 14 days of the inspection.
If your home inspector finds something hazardous in the home, you’ll need to get it tested as quickly as possible.
Reality: All inspections and testing have to be completed within the original inspection contingency deadline unless your agent writes in specific language that extends the inspection deadline if additional inspections or testing are recommended by the inspector.
4. I can declare something as a defect even if it’s in the Real Estate Condition Report.
After a home inspection, the buyer will have an opportunity to declare defects — that is, pointing something out that could potentially lower the value of the home.
Reality: According to lines 425-426 of the WB-11, defects do not include structural, mechanical or other conditions the buyer knew about beforehand. By signing the Real Estate Condition Report, the buyer acknowledges the nature and extent of the damage, disqualifying it as a defect.
Contact Accunet Mortgage for step-by-step guidance on putting together an Offer to Purchase.
5. The buyer gets input on how defects are fixed.
Reality: Unless your agent added additional language to the original contract, you do not have the right to decide how the defect will be repaired, who pays, when it will be completed or what happens if it doesn’t get done.
6. If the seller never gives me a Real Estate Condition Report, I can cancel the contract at any time.
Reality: There is a timeline. According to Lines 153-155 of the WB-11, a prospective buyer who does not receive a report within 10 days after the offer is accepted, may, within 2 business days of the end of that 10 day period, rescind the contract of sale.
7. If the buyer gets laid off before closing, they can get out of the contract by rescinding the commitment letter.
Reality: Once you deliver the commitment letter, that’s that. A seller could make you perform if they wanted, but the smart move would be to not deliver the commitment letter until the last day, because the buyer is at risk.
The biggest takeaway from this list of misunderstandings is that unless an experienced professional goes over the purchase contract thoroughly, you, as the home buyer, are at risk of a situation that can cost you headaches, money, time and potentially the purchase of your new home.
As we like to say at Accunet, the devil is in the details. Being educated on the subject and surrounding yourself with the most knowledgeable and experienced lenders and agents are the only concrete ways to make sure your home buying process ends with you happy and in a new home rather than frustrated and filled with regret.
Contact Accunet today to get started!
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