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The Agreement to Purchase the Home
When you have decided to buy, the builder or seller will usually require a cash
deposit (earnest money) as evidence that you really intend to go through with the deal.
Make sure that when you make a deposit, you get a signed agreement from the seller
to refund your deposit if you are unable to obtain VA financing, or if the builder
and/or seller fails to go through with his or her part of the agreement.
You may also expect to be requested to agree that if you fail to go through with
your part of the agreement, you will forfeit your deposit. These clauses are
customary and usual in sales agreements. Be sure that you know the person to
whom you are making the payment is reliable. Some veterans have lost their
deposits to persons who were dishonest or went bankrupt, and VA can usually
do little to help in these cases.
A contract consists of an offer and an acceptance. Generally, the purchaser
initiates the contract by signing an offer to purchase on a form entitled
"Contract of sale," "Purchase Agreement," "Deposit Receipt," etc., which
is often supplied by the seller's agent. This document, when completed with
all essential terms and signed by the purchaser, is a formal offer by the
purchaser to buy the property on the stated terms. A contract occurs when
the seller accepts the offer without qualifications or change by signing
the document prior to withdrawal of the offer by the prospective purchaser.
The contract customarily provides for the purchaser to deposit a sum to be
applied to the closing costs or purchase price.
Bear in mind that the sales contract
is a legal document containing legal terms which are hard for the average
person to understand. Make sure you do understand everything that is in the
contract before you sign. Any of its provisions may be vital to your interests.
The best way to protect yourself is to get competent advice from a lawyer in
respect to the legal details and the requirements in your area. VA is not
authorized to perform this service for veterans.
Remember, when the settlement date arrives, you are committed to the purchase of
the property. Thus the time to decide the terms of sale, raise questions, and
establish fair fees is not at time of settlement, but earlier, when you negotiate
with the seller and providers of settlement services. By the time of settlement,
any changes in settlement costs and purchase terms may be difficult to negotiate.
Topics in the VA Quick Guide to Buying or Building Homes:
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