5 Contract Terms You Need to Know

You’re sitting in Starbucks with your agent, getting ready to write your first offer on a home you just saw. The kitchen was newly remodeled, the crown molding was beautiful, and oh girl, that master suite! You’re rolling along answering questions when you start hearing terms you don’t know. Your agent starts asking you questions you can’t quite answer because you aren’t sure what the terms she’s using are so you just sort of default to whatever she thinks is best.Don’t get caught in the confusion of contract terms. While I will always help you make the best decision sometimes what you would choose and I would choose are different. I’d rather you can make the best choice for you. Learn these five key contract phrases before you get to the offer table.

5 Contract Terms You Need to Know

• Contingent/contingency: A contingency would be anything that needs to be settled before you can purchase the home you are offering on. For example,  the need to sell your own home before you purchase another home or getting proper financing Often phrased in the question “Do you want your offer to be contingent on any?.”

• EMD: The EMD stands for Earnest Money Deposit. This is the deposit held in escrow by the buyer’s agent’s brokerage. This deposit is used to show the seller that you are a serious buyer. It is typically paid in cash or by check to the brokerage the day you submit your contract. More questions about EMD? Read 5 Things to Know about EMD.

• Purchase Agreement: Your purchase agreement is the contract you are signing and submitting for the house. Often you’ll hear it referred to as a contract or a purchase agreement interchangeably. This is the binding document that states the current owner of the home will be selling the home to you and that you agree to buy said home if certain conditions are met and agreed upon.

• Home Warranty: In Virginia, you are asked if you’d like to purchase or decline a home warranty and if you’d like to pay for it or request it from the seller. Baseline warranties are typically around $500. Review different warranty programs while looking for homes so you know whether you’d like one and which one you’d want to purchase. 

• Closing Costs: Your closing cost is the amount you’ll be paying on your closing date. Depending on your situation and loan type you may be able to roll this into your monthly mortgage payment. If you aren’t this will be money you’ll have to have on hand in the form of a certified check on closing day. If you will need assistance from the sellers with your closing costs you’ll make that part of your contract. This is a good conversation point to have with your loan officer so you know how much to ask for while writing your offer.