Top 10 Problems on Real Estate Contracts

Home Inspections: If a home inspection is said to be done in the contract, the appraiser and loan underwriter have the right to ask to see a copy of it. They also reserve the right to require the findings to be repaired/replaced before the loan closes.

Title Company: Some lenders require an addendum to be prepared and signed if the title company changes from what is listed on the contract.

Flooring Allowances: Flooring allowances can not be given to a buyer in cash. Most lenders require flooring allowances to be paid directly to the company that will be installing the flooring.

Seller Capped Closing Costs: If a contract states that the seller will pay $6000.00 in closing costs and the closing costs are only $1500.00, the rest of the money will not flow over to prepaid items if the contract does not specifically state closing costs and pre-paid items.

Addendums: Always make sure the lender gets all pages of the contract to include addendums.

2% of closing costs is different than 2% of sales price towards closing costs: Make sure you reference that the seller will pay 2% of the sales price towards the closing costs and not 2% of closing costs. This can cost you thousands of dollars out of your pocket if it is not stated correctly.

On VA loans the buyer cannot pay all of his own closing costs even if he agrees to pay them all. There are non allowable closing costs that a Veteran cannot pay. See non allowable closing costs list in realtor reference book.

Personal Property: DO NOT include personal property in contract. Underwriters will usually ask you to remove from the contract items such as lawn mowers, big screen TV’s, etc.

Repairs: If there are repairs noted on the contract they will be required to be done before closing. Sometimes there is a chance the appraiser will require them to be  fixed per the contract.

Closing Costs: The loan program will always override the contract. If the specific loan program the buyer is using only allows the seller to pay 2% of closing costs then the seller can only pay 2% even if they agree to pay all of the fees.