Last week I talked about how important it is for both parties to respect the contract they sign, and specifically addressed important things for sellers to keep in mind as they move toward a closing.  Sellers are not the only ones, however, that need to be sure to honor the contract they sign.  Buyers, you too need to understand the contract and abide by its terms.

Let’s start with deadlines.  The contract gives you a set period of time to address your contingencies, such as inspections, appraisals and mortgage applications.  The contract is very clear – miss your deadline and you waive your contingency.  So once you have a signed agreement, take the time to write the deadlines on your calendar and then be sure that you comply with them.  If you don’t, you will lose your bargaining right and your only option if you are unhappy at that point is to terminate and forfeit your hand money.  That’s a real shame when you have taken the time to find a home you love and a compromise may have been reached if you had been watching your calendar.

Understand the mortgage approval process.  You generally must apply for a mortgage within 7 days of reaching agreement.  It is possible that you could pay out mortgage application fees only to decide you are unhappy with the inspection, terminate the deal, and lose your mortgage application fees.  This is something to work out with your lender before you make an offer on a home – some will allow you apply fees to future home purchases if a deal falls apart – but in any event, you absolutely must make timely application even if this means you risk losing the fees.

If your home purchase is contingent upon the sale of another home, or if you have an extended closing period, you will likely have to pay for two appraisals – one at the time of initial application, and one prior to closing.  This will add approximately $350 to your expenses.  Again, while it is additional funds you must expend, it is part of the deal you struck and only fair to the seller who is likely abiding by all of the terms that apply to him.

Understand that if you do back out of a deal once your contingency periods have expired, you will lose your hand money.  It is the deal you struck when you offered to buy the home and just compensation to the seller, who has taken his home off the market with the understanding that you will buy it.  Put yourself in his shoes before you decide to tie up the release of hand money in arbitration.

As I said last week, contracts are lengthy and complex and it is important that you really understand what you are signing and what you are obligating yourself to do — be sure to hire a realtor that you have confidence will thoroughly explain what you have signed and help you to be a good buyer and honor all of its terms!