With every purchase transaction, there has to be a purchase agreement in the form of a contract. Whether it’s downloaded from the internet or drawn up by an attorney, there are areas that can easily be done incorrectly. Knowing these areas, and making sure they are done properly, will help make the lending side of the transaction smoother for the borrower and real estate agent.

Four places to be aware of when filling out a contract include:

Address

One of the first things an underwriter checks is if the address on the real estate contract, homeowner’s insurance, title work and appraisal all match. When things are placed out of order, problems arise. The easiest way to make sure this doesn’t happen is to go to the United States Post Office website: www.usps.com. In the section to check zip codes, type in the street address and state but off leave the zip code. The website will generate the official post office address. This should be used on all documentation.

Type of loan

Most of the time, the borrower has been pre-approved and has some idea of what type of loan they are getting. These types of loans include:

• conventional, either with or without mortgage insurance
• FHA
• VA
• USDA (i.e. rural development)

Different parts of the contract will be affected by what type of loan is selected. A lot of these can be answered with the phrase, “per lender,” which means it will be left up to the lender to make those decisions, but it is important to get the type of loan correct so the rest of the contract can be filled in appropriately.

Closing Costs

In almost half of all real estate transactions, the seller will pay costs on behalf of the buyer. There is a section where you can write this agreement and the language you use is very important. Dollar amounts need to be used instead of percentages. For example, write in: “[Up to] $XXX.XX amount of buyer’s prepaids and closing costs.” Prepaids are items that are required on the purchase loan to be paid in advance on behalf of the borrower such as homeowner’s insurance and escrow setup.

Personal property v. real property

There is a section in the real estate contract that lists the items to be included in the sale of the property. A good rule to follow is anything attached to the property goes with the property. Very commonly though, you see the addition of a refrigerator, washer and dryer or lawn mower. The underwriter generally does not like to see those types of items listed in the contract because they aren’t considered real property. The underwriter can go as far as to request the appraiser give a value for those items and then adjust the down payment accordingly. The best way to handle these items is to have a separate bill of sale between the buyer and the seller. This can be separate from the real estate contract.

If one of these things isn’t handled correctly, revisions will have to be made which could potentially delay the transaction. The ultimate goal is to meet the agreed upon closing date. Minimizing mistakes in these four key areas can help ensure the closing is not delayed.