When purchasing or selling real estate, there are multiple issues you will want to consider. Many times a boilerplate agreement provided by a broker or realtor does not cover all of the issues, regardless of whether it is a commercial or residential transaction. The top five things to consider when selling or purchasing real estate are:
1. Representations and Warranties. Will there be any representations or warranties made to the property, or will it be an "AS IS" deal? Typically, the seller prefers to have the property sold "AS IS" while a buyer would like representations and warranties, which are factual statements made by the seller to protect the buyer down the line in case something goes wrong.
2. Environmental Liabilities. In today’s day and age where environmental liability continues to be a concern to property owners and lenders alike, the environmental history of the property is important to the buyer. Many buyers don’t realize that once a property owner takes title to the property, he or she can be on the hook for all environmental liabilities regardless of whether or not they are actually placed there by the property owner or by their predecessors.
3. Inspection Period. An agreed upon inspection period can benefit both the buyer and seller. The inspection period is beneficial to the buyer in that it allows the purchaser to "kick the tires" to look into the property. By allowing the purchaser to inspect the property, it will potentially limit the buyer’s ability to come back on the seller, especially in an "AS IS" transaction.
4. Escrow Deposit Amounts. Once the contract is signed, the property is "off the market" for a period of time. In complex commercial transactions, this period can be quite lengthy. Discussions need to take place about whether or not the deposit is refundable either from the beginning or over a period of time. In addition, if an extension prior to the closing date is granted, it should be determined whether or not additional deposits should be made.
5. Contingencies. The contract should spell out various contingencies or "out clauses" whereby the purchaser has the ability to terminate the contract if certain conditions cannot be fulfilled. In our experience, we have seen these contingencies include everything from financing to zoning approval.
Ideally, you would involve your attorney in the purchase negotiation process well before the contract has been signed. Once signatures are on the purchase agreement, you are now bound to either purchase or sell the property, and it is usually too late to make further changes to the contract for your benefit. If you have any questions regarding a pu