Frequently Asked Questions About Real Estate Purchase Agreements
Question: Is the agreement binding before I sign the escrow instructions?
Answer: Yes. The offer and acceptance together constitute a binding agreement. The escrow instructions are nothing more than the term implies - they are instructions to escrow based upon the offer and acceptance.
Question: If I list my property for sale, do I have to sell it? Can I change my mind?
Answer: Just because you list it you do not have to sell it but you may be obligated to the real estate agent for a commission in some cases. Most listing agreements require that you pay the broker a commission if they present you with a buyer who is “ready, willing and able” to pay the full price for the property.
Question: Do I do not need an attorney to represent me in a purchase or sale of real estate? Won't the broker and escrow will take care of everything?
Answer: Although brokers have fiduciary duties, they are not attorneys. By law, they are not allowed to give you legal advice. Because both your listing agreement and the offer and acceptance are binding legal documents it is prudent to retain a competent attorney to look over the documents before you sign them.
Question: Doesn't it cost too much money to have an attorney look over the documents when I purchase or sell a property?
Answer: You will usually pay an attorney a small fraction of what your broker charges you for the transaction. Because most real estate attorneys charge on an hourly basis and not a commission, they will have only your interest in mind and do not have a vested interest in the transaction going through.
Question: Will the bank make the loan if the property is not worth what I am paying for it?
Answer: Banks make their determination based upon the information provided to them by their appraiser. The appraiser, however, does not perform a comprehensive inspection of the property. Generally speaking, however, appraisers do not conduct thorough investigations into the particular property. They do not inspect for mold or termites, they do not check for structural defects, geological problems or the other problems that can be found by reliable inspectors. With respect to rental properties, the bank will not scrutinize the leases the way a good attorney would. Remember, it is not up to the bank to do your due diligence for you.
Question: Are all escrow companies are alike?
Answer: Most people let their brokers dictate the escrow and title company that will be used in their transaction. But, as in any other business, there are good and not so good escrows. Different escrows will have different rates for the same service. Some are definitely more customer oriented than others. Some escrows are better with short sales while others specialize in commercial transactions. Do not by shy about shopping around for the right escrow before you make or accept an offer on a property.