Understanding Ohio purchase agreements for real property

Key structural aspects of real estate contracts in Ohio

The core legal element of a real estate contract is an adequate description of the property involved, which can include information about the sales price, the conditions of sale and other factors. Any Ohio real estate contract must contain the names of the parties, a full description of the subject property, a statement of the price and terms of payment, and signatures from both parties.
Ohio law requires clear and specific descriptions of the properties being sold, including the location, boundaries and exceptions. Readers should always check with a real estate agent or other specialist if they have questions about the types of words and phrases that should and should not be used during the creation or execution of these documents, because a poorly written description may not hold up in court . While many properties in Ohio are identified clearly by their address, other properties could require more information be provided. This includes locations where boundaries may not be as clear or where there are issues with easements, encumbrances, and liens.
Closings are a normal part of a real estate purchase contract, and the closing date should be clearly stated in the document. This date will rely upon the title commitment for the property in question, but is generally flexible between the two parties to the transaction. Other important legal terms for real estate purchase contracts include earnest money, closing costs, financing contingencies, home inspections, property disclosures and earnest money deposit requirements.

Legal formalities and enforceable terms

For a real estate purchase contract to be valid, it must be signed by both buyer and seller, unless it is in writing. While not always required, having written proof of the agreement helps prevent disputes over what was agreed to. Although not all states require real estate contracts to be in writing in order to be enforceable, Ohio does. All purchase contracts for the sale of real estate must be in writing under Ohio Law, Section 5301.01, with the property description containing more than an estimated amount. Free forms are available on the Internet, but for significant disputes, it is advisable to have an attorney draft the contract.

Common contingencies found in Ohio real estate contracts

Additional protections for buyers and sellers are included in the terms of sales agreement in the form of contingencies. In general, contingencies permit buyers or sellers to cancel the agreement or renegotiate the terms of the agreement under certain circumstances. For buyers, the most common contingencies are inspection, financing, and appraisal contingencies. Contingencies help protect buyers from being committed to purchase a property that has substantial defects that cannot be remedied or from overpaying for the property.
Many sales agreements will include a financing contingency, which provides that the contract is contingent upon buyer obtaining financing at interest rates acceptable to buyer. The amount of time provided to obtain financing is negotiable by the parties. Failure to obtain financing within the agreed timeframe will permit a buyer to terminate the agreement and obtain a refund of the deposit.
Paradoxically, the appraisal contingency protects seller while also protecting buyer. Most lenders will require an appraisal of the property before agreeing to fund it. The appraisal provides a third-party opinion as to the value of the property and is intended to protect the lender from loaning more on the property than the property is actually worth. Because borrowers are required to pay for the appraisal, they are not always reviewed immediately before making an offer on a property. The appraisal will be ordered after the agreement is signed and the lender may require changes to the agreement based on the results of the appraisal. If the appraisal reveals that the value of the property is less than the buyer was willing to pay, the buyer, and the seller will have options as to how the transaction should proceed.

How real estate agents (and lawyers) can help clients in real estate deals

Real estate agents and attorneys both play important roles in drafting and reviewing real estate purchase contracts in Ohio. Each has a duty to ensure that their client’s best interests are protected and the purchase contract is legally compliant.
Real estate agents are responsible for preparing purchase contracts based upon the requirements of their board of realtors. These boards typically require the use of standard addendums and forms which contain required language. The boards work with real estate attorneys to determine what language is necessary to ensure that the contracts include provisions addressing certain common situations.
Attorneys are responsible for drafting addendums to the purchase contract. Addendums contain additional provisions on topics not covered in the standard forms or address issues unique to a particular transaction. When an attorney drafts an addendum , they are ensuring that the language contained in it not only addresses the issues at hand, but that it also does not create other issues for their client. An attorney also has a duty to explain any potential contact with the Ohio Real Estate Commission (OREC), and review potential remedies available if either party fails to comply with the terms of the contractures.
It is important to ensure your real estate agent or attorney not only reviews a purchase contract, but that the contract is amended, as needed, to protect your interests in the transaction and confirm that the contract complies with all state and local law.

Pitfalls to watch out for with real estate deals in Ohio

In contemplating the sale or purchase of real estate, the potential pitfalls associated with a sale may be obvious. However, some pitfalls, especially in a purchase contract, are easily overlooked but may prove to be the basis for misunderstanding, delay or even a failing transaction. The following is a short list of potential pitfalls in an Ohio real estate purchase contract:

• No financing contingencies in the sales contract. Buyers often fail to include a safeguard within a contract for the financing of their purchase. Buyers may be embarrassed when they cannot secure funding for their new home, but a purchaser should not assume that they will have no problem obtaining financing. Sellers of property also desire a quick closing and seek a contract without contingencies. However, a no-contingency contract can lead to disappointment for both parties when acceptable financing is not obtained.
• Title defects must be disclosed. Purchasers of property expect to receive clear title to the property upon closing. Liens on the property, unpaid taxes and easements must be disclosed to the buyer prior to closing. If the seller is aware of such limitations, they may be required to make a full disclosure to the buyer before the purchase contract is signed. This does require the seller to obtain a title search prior to selling the property. A seller may obtain insurance for any problems affecting the title, which insures the purchaser against such losses upon closing. However, if such title problems are not disclosed, the purchaser may have limited recourse against the seller and may suffer a loss.
• Not understanding the tax implications for the purchaser after closing. Buyers may be surprised at the increases in their property taxes after they become the owner of the property. The purchaser has become burdened with paying property taxes. Buyers should be aware that the total property tax amount owed by the property may increase upon purchase of the property. This is due to the change in ownership, which may be the trigger for reassessment of the property by the county auditor. The direct tax impact will depend on the type of property purchased and the county.

Closing a sale of Ohio real property

Once the Ohio real estate purchase contract is signed by all parties, it opens a pathway for the completion of the transaction contingent upon the terms and closing date contained in the purchase offer. A simple overview of the main steps that must occur prior to closing on an Ohio property are outlined below.
After signing the Ohio real estate purchase contract, the first step is to immediately apply for a mortgage. The longer you wait to apply for a mortgage the more likely there will be an issue with your financing.
Once you apply for a mortgage, the lender will complete a title search to determine if the property is free of liens and other legal issues such as easements and other title encumbrances. Purchasing title insurance is strongly recommended for buyer’s in this instance. As a way to safeguard the buyer’s interest, most title insurance companies will provide a tax certification to confirm if the taxes have been paid and if there are any existing liens .
The next step is to have a survey of the property completed. The survey will show what existing easements and encumbrances are on the property. You should also consider having an appraisal of the property completed. An appraisal is an assessment of the property’s value based on statistical analysis.
Obtaining title insurance for the mortgage loan and title commitment for the sale will protect the buyer from any problems that could arise with the existing title to the property.
After the title issues are resolved, you’ll be prepared to close on the property with the seller. In Ohio most attorneys handle closings on residential properties. Your attorney will draft the deed and the real property laws in Ohio require that the deed be placed in escrow and recorded on the public records.
Buying or selling a home is likely the single most expensive transaction you will ever be involved with so make sure you follow the appropriate steps and consult an attorney to protect your best interests.