Guide to Real Estate Contracts in Georgia
A real estate contract is a legally enforceable agreement between two or more parties involved in a real estate sale, purchase, trade, or transfer. It lays out the buyer’s and seller’s intentions. To be enforceable, real estate contracts must be in writing.
A real estate contract typically includes provisions for financing, seller assistance, home inspection, fixtures and appliances, closing date, and the sale of an existing home, among other things.
While there are certainties in a real estate contract, there are also variables pertaining to state laws. Here is everything you need to know about real estate contracts in Georgia.
How does a Real Estate Contract Work
First, let’s take a look at how a real estate contract works. There are three basic steps in a real estate contract:
- The homebuyer’s agent prepares and submits an official offer form to the seller. The parties involved, the property information, the purchase price offer, the earnest money deposit, closing costs, and the closing date will all be outlined in this initial offer.
- The seller now has the option of accepting, rejecting, or countering the initial offer. Proposed revisions or negotiated terms such as purchase price, closing expenses, contingency, and so on could be included in the counter.
- The contract becomes legally binding after both parties accept and sign it.
The Components of a Real Estate Purchase Agreement
As mentioned before, there are certainties in a real estate purchase agreement. Here are the certain terminology and components of a real estate contract entail.
Parties of the Contract
The first requirement of a real estate sales contract is to identify all parties involved, including the buyer and seller’s complete legal names. If the buyer and seller are represented by real estate agents, each agent, as well as the real estate broker of record and their contact information.
The information for the lender, title firm, or escrow agency should also be listed, even if it is in a distinct section of the contract.
Given that each real estate transaction is a big financial commitment for the buyer, the first consideration for both sides is the price. You can get comparative market research from their real estate agents to see if the present price is above or below market value.
Purchasing real estate is likely to require the use of a mortgage unless you are financially comfortable enough to pay in cash. You should examine your interest rate for financing based on your credit score before drafting the offer. If you have to back out after making an offer, the seller keeps the earnest money. If you’re financing the deal with a loan, you’ll need to specify it in your contract.
Georgia courts require a complete and specific declaration of payment terms. This could be:
- A combination of cash and a loan from a bank or a third party
- Deferred payment for a transaction that was financed by the seller mortgage
- Cash without the need for a loan
- The buyer can take the property subject to an existing loan if the buyer assumes the loan (if this is allowed in the security deed)
- Other types of real or personal property
Finally, if you are buying or selling real estate in Georgia, you should engage with a reputable real estate attorney who is familiar with the market.
The requirements that must be completed before closure are known as contingencies. Obtaining a loan to fund the purchase, the buyer selling their current home, correcting any flaws discovered during the home inspection, and the house appraisal being equal to or higher than the sale price are all examples of contingencies.
In order to avoid any third-party claims on the property, you need to do a title search and look through public documents to determine the property’s rightful legal owner.
Costs of Closing
Closing costs and who is responsible for them vary by state, but they often amount to 2–5% of the home’s purchase price. This includes taxes and expenses associated with property transfers, such as recording the deed and paying the title firm, which performs research to trace the property’s chain of ownership and ensures no one has a monetary or ownership claim on it.
In addition, the title business provides title insurance to safeguard against future claims. The commission paid to the real estate agent is an additional expense at closing that normally amounts to roughly 6% of the purchase price.
Earnest Money Deposit
When a buyer enters a contract, they usually pay a nominal fee, usually 1–3% of the home’s selling price, to show that they are serious about buying the house. A third party, such as the seller’s real estate attorney or title business, holds the money in escrow until the transaction closes.
The sum should be indicated in the contract, and the funds will be applied to the final purchase price. The majority of people use it to cover the deposit for another house or closing charges. Your purchase contract should also have information about to what point deposits are still refundable and when they become non-refundable.
Things to Consider in Your Real Estate Sales Contract
Certain items may be on exhibit while the property is being viewed, but they are not intended to be sold. These items could be mentioned in the purchase agreement as well.
Georgia home sellers don’t have to legally fill out a disclosure agreement, however, there’s a general requirement for sellers to disclose any defects or issues that otherwise wouldn’t be obvious to the buyer. Also, it’s essential to comply with state-mandated disclosure obligations.
Sellers are rarely compelled to actively look for flaws, but they must disclose any faults they are aware of.
Excluded and included items in the sale
Structures and fixtures related to the property are often included in the sale along with the land. Unless the purchase agreement clearly states otherwise, a fixture that is permanently attached to the property is deemed to be included in the sale. The following are some examples of fixtures that could be removed or included from the sale:
- Chandeliers are examples of light fixtures.
- Equipment for heating and cooling
- Kitchen appliances that are built-in
- Fixtures for the bathroom
Disclosure of Lead Paint
Federal Law (Title X, Section 1018) requires landowners, sellers, to state and provide information on lead-based paint before sale or lease. As it’s a Federal Law, it’s applicable in Georgia as well.
Because of the serious health hazards linked with lead paint, it is critical that sellers of older properties warn potential buyers about the dangers. People selling homes built before 1978 may be obliged to provide a lead paint addendum stating whether or not the home contains lead-based paint. This supplement may draw attention to the current state of painted surfaces and the location of potentially hazardous paint.
Disclosure of Methamphetamine
Many states require sellers to declare any prior knowledge of methamphetamine manufacture on the property they are selling. If the seller knows about previous methamphetamine manufacture, the status of removal and remediation should be specified in the purchase agreement or in a methamphetamine addendum.
Georgia Property and Real Estate Law
As mentioned before in this article, real estate laws and property purchasing processes may differ depending on the state that the real estate transaction is taking place.
Here’s everything you need to know before closing a real estate deal according to the real estate laws in Georgia.
An Attorney must be the Closing Agent
The closing agent (or escrow agent) for real estate purchases in Georgia must be an attorney. The closing attorney gathers all of the cash needed to close, then disburses the lender’s loan funds, pays off any existing mortgages on the property, and disburses the remaining funds to other parties as specified in the contract.
The closing agent also files any security deeds that indicate a lender’s secured interest in the property and documents the deeds necessary to transfer the title of the property with a clerk of court.
Most purchase and sale agreements include a due diligence period during which the buyer can conduct any necessary property inspections. This process might be aided by your real estate agent so that it is done within the contract’s timeframe.
Also, as per Georgia Official Code Annotated §44-1-16(a)(1), sellers must answer any direct questions that the buyer may have about the property honestly. Any questions from previous inspections to neighbourhood issues when asked by the buyer, need to be addressed truthfully. Failure to answer questions or circumvent them could result in lawsuits later, so it’s best to be sincere and honest.
Additionally, a home inspector can assess the property’s condition and produce a comprehensive report on their findings. If the property inspection reveals any necessary repairs or other undesirable finds, the buyer normally has three options: terminate the contract and obtain their earnest money back, negotiate for repairs or a price change, or accept the property as-is.
Appraisal of Property
The lender will order a property appraisal to assess the property’s market worth once any due diligence time has expired. The lender may refuse to accept the loan if the home does not qualify for the original cost.
The closing attorney interacts with the parties and their agents to organize the closing ceremony after being notified by the lender. If someone is unable to attend, notify the closing attorney in advance so that the attorney can make alternate arrangements, such as preparing an authority to act.
The lender will send the buyer a closing disclosure three business days before the closing date, including the loan details, monthly payments, closing charges, and the money required at closing. Before the closing, study the disclosure and ask your lender any questions you may have.
If any necessary payments are due, the buyer will send the amount to the closing attorney’s account. The attorney’s trust account is used to collect and disperse all closing payments.
The selection of a lender, real estate agent, and closing attorney is critical and can make or break the deal during the closing process.
In this article, we’ve listed everything you need to know before buying or selling a property in Georgia.