Sophie Moench October 16, 2021 Agreement
If you're keeping score at home, one of the biggest things that I see is buyer, when it comes to the purchase agreement, have no idea what's in the purchase agreement. Which makes sense, why would you know it's in a purchase agreement. But it's a pretty important document, because what you put in here can either make the difference between getting a house and not getting a house.
And I want to make sure that you know exactly what you're getting yourself into, when you want to buy a house, and sign one of these purchase agreements in the state of Minnesota. So, we're going to go through it here. A purchase agreement needs to have three things. It needs to have what you're buying, who you are, and when you're going to close on it, and how much you're going to pay for it. And outside that, they get kind of bigger and bigger and bigger.
In the State of Minnesota, a purchase agreement used to be one or two-pages long, and now it's kind of swelled up to what they have, 7, 8, 9, 10, 11-pages. So, the reason why they have 11-pages from one, because people kept on getting sued, and they kept on adding things to it, to protect you the buyer. So, I'll show you exactly what's in a purchase agreement.
So, the first thing that we want to do is obviously find out who you are. If you're buying a property, and exactly how you're buying it. Are you buying it as yourself, or you're going to be married, or buying it with a buddy, or you're buying as a business? If you're buying as a business, it's always a good idea to include your incorporation docs, so they know exactly who can sign on it. They'll probably ask that a bit later down the line. But, if we're going to be on top of your game, add those with the purchase agreement. So you don't have to go back and get that.
But, what we're going to do on the first page has all pretty much the interesting, and good information that you need to purchase agreement. It has how much you're going to pay for, and when you're going to close on it, and how much money you're going to put down on it. Those are the kind of the big things that we have. Another big one that we have, and it's very important, because it's right on the top is something called earnest money. Earnest money is money that you put in control of the listing broker, on who is going to hold that money. And that money could become at risk, if for some reason you don't close on the property.
So, if you put down $1,000, your purchase agreement might not look as strong as someone who put $10,000, because if you walk away for any reason, you might only be liable for a thousand bucks. That's all you could lose, but you could lose $10,000, so that you're just a little more interested in making sure that property closes. In this State, I don't know, they kind of vary between 1% and 2% of what the total purchase price is. I've seen a lot more, and I've seen some with a lot less, but it all depends on what you're comfortable with.
And then, it comes down of the agreement page here, it says; what the property address is ?, what counties it located in?, and then typically the legal description of it, and everything that's going to be included with the property, notwithstanding personal property. The biggest thing is that refrigerators are technically personal property. TVs are personal property, and so that's why they look as a refrigerator as personal property, because you just can plug it in, and pull it out, and it's fairly easy.
So, the biggest thing I say is anything that screwed, glued or nailed to the property, that looks like it's supposed to be there for a long period of time that typically runs with the property. But you always want to cover yourself, and make sure that you have a personal property addendum, or at least know that you know the refrigerator, the washer, the dryer, the dishwasher, which most of the time is screwed to the cabinets. So that's most of the time consider personal property, but sometimes you have one that might be a portable dishwasher, that you just plug in all the time, and take out that probably wouldn't be considered personal property.
So, you want to make sure that in your purchase agreement. Next thing you have is the purchase price. How much are you gonna buy it for? You know, people usually skip over this, and go straight to this because that's a big, exciting number on it. And you write down how much you wanna buy for. And then you come in, and you say how much cash you want to put down? So, there's veterans financing, which is called the DVA loan. Which is a benefit that our veterans have earned by serving in our military, that they actually in purchaser property was zero percent down. So, that's a great benefit that they earn, and a lot of times DVA loans might get pushed to the back, because they say, well, they're coming in with no money. But that has no bearing on, if it's going to close or not, because DVA loans are great loans, and they close all the time. But typically, the more money that they have down as far as a down payment. The easier it is for them to get financing.
And then come down again, and says; what your mortgage financing is?. So, let's say you're going to put 10% down, and then in next line you put 90%. Meaning you can put 10% of your own money down, and then you get to 90% of the banks. And this also comes in this other one, which comes into an assuming category. We don't do a lot of these in Minnesota, just because a lot of the loans are assumable, most FHA loans are assumable. But most people don't do it, just because the financing right now is so low. It's actually cheaper to go out, and get something. But, if you assume a contract, you might be assuming something that's already have 5 or 6 years paid off on it, and might be something to look at. So, you're getting a pretty low interest rate on a much shorter timetable.
And then also a contract for deed, that's basically what we call seller financing. Meaning that if the seller is agreeing to finance your purchase, and then you have your closing date. This is saying in the page, when all your financing is going to be in place, and when you're going to close it grab the keys.
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