Understanding the Utah Purchase Contract
Understanding the Utah real estate purchase contract is essential to writing a strategic and compelling offer that is superior to other buyers in the Utah market. Why is it important to understand the ins and outs as a buyer? Well, as a purchaser, you want to make sure that you have a solid understanding of what is expected of you, the seller, and when these expectations need to be met.
The purchase contract in Utah is very buyer friendly. For example, there is something called an “earnest money deposit” that must be included in any contract written. The point of this deposit is to provide the seller with funds that they would use as liquidated damages for a buyer to come in, get under contract, and then cancel the deal. The earnest money deposit is a showing of “good faith” that the buyer is true and earnest in their intent to buy. Multiple states make this earnest money, nonrefundable to the buyer, and released to the seller relatively early in the contract process. In the state of Utah however, the buyer has the ability to keep those funds liquid for a longer period of time throughout the contract. So, we place the earnest money deposit on hold during certain contingency periods in the contract to allow the buyer to cancel, and be refunded the earnest money so to not be out any funds. The normal timeframe that this would be refundable to the buyer is typically between 14 to 21 days in a standard contract timeline. It is extremely helpful for a buyer to be able to get under contract, look at the condition of the property, and look at their finances all before being committed to losing 1 to 3% of the purchase contract amount if they cancel.
The first contingency to get past is the diligence deadline. This allows you to get any and all desired inspections completed on the property, and either be content with the results or negotiate the contract in order to better suit the buyers needs/goals. If those are not met, the buyer can cancel and get their earnest money deposit returned to them.
The next contingency is the financing and appraisal deadline. This contingency allows for the buyer to have enough time to get his finances in order, the appraisal returned back and reviewed, and verify that the buyer can, in fact, afford to make the purchase. If not, or the appraisal comes in too low, we can stop and negotiate or cancel the contract and have the earnest money protected and sent back to the buyer.
So in essence, understanding the contract is the single most important thing you can do when buying. It is the governing document that allows a buyer to verify what they are purchasing and protect both parties from problems. In the state of Utah, the only way that you would be losing your earnest money is to go past all these deadlines without doing anything, and then cancel the contract. Having a good agent working with you to let you know of the deadlines and remind you of what needs to be done prior to, is essential. It is very difficult to have a buyer lose in this market with a normal contract and standard deadlines. However, just like everything in life, there are exceptions to every rule and in every contract. No two contracts are the same, and buyers often have to get more creative in their contracts to get a leg up on the competition and get their offer accepted. Having the right agent allows you to better strategize with pertinent and up to date information on every opportunity. Reach out and let us help you achieve your goals!