To Become Wealthy: Details About the Contract Part I

Contracts are very difficult for anyone who has not spent years studying law to read. We live in a very litigious society that has lead to an increased wordiness of any legal document. Once more lawyers get involved, the amount of paper increases geometrically. It can sometimes be terrifying to witness.



However, I am going to attempt to explain our contact to the best of my understanding. Please feel free to jump in if I have made any errors in my interpretations.



It starts out simply enough identifying the sellers and the buyers, and the location of the property that is being sold and bought. Then it even goes as far as to list all of the things connected with the property such as the rights to the leases, and warranties, trade names, or anything else associated with the ownership of the property. And of course the most important portion of the entire document also appears on the front page. The Sales Price complete with the amount that we are to put down in cash at closing.



Page two includes a contingency that allows us out of the contract if we cannot secure financing. This seems kind of obvious to me, but I guess it needs to be there. But in order to actually get to this point we needed a pre-approval letter from a bank to prove that at least one bank is willing to give us financing. So, this item seems a little redundant to me.



Earnest Money: This is the amount of money that you need to present to the seller along with the bid. It is being held by the listed Escrow company and the seller will receive it at closing as part of the down payment, or it will be return to us if the purchase falls through. I have absolutely no idea why this needs to be done. What is the point? We have already proved that we are not penniless delinquents before we placed the bid, why do we also have to show that we can write a check for a few thousand dollars. What is this supposed to prove? Does the seller feel some sort of security knowing that a portion of our money is in an escrow account? It is fully refundable to us if we back out of the deal or if the seller does. But it is one of the things that we had to do, so it is stated in the contract.