Buying and selling a home in Virginia comes with lots of paperwork. And for good reason! During the biggest financial transactions of most people’s lives, it’s important to have everything documented and everything agreed to in writing. You need to make sure all parties (the buyer, seller, buyer’s agent, seller’s agent, escrow company, and lender) are all on the same page.
Here are the most common types of legal contracts used when buying a house in Virginia.
Virginia Listing Agreement - Exclusive Right to Sell
The Virginia Listing Agreement is a contract between the seller and the listing agent. This agreement identifies the property being sold, outlines the listing agent’s responsibilities to market the property to buyers, and outlines the seller’s responsibility to make the house available for showings.
This agreement is exclusive for a specified period, meaning that the seller cannot work with another listing agent while the Listing Agreement is active. This contract also states the amount due to the real estate agent upon closing of the sale.
Virginia Residential Contract of Purchase
Once a buyer is interested in the property, the home buying process in Virginia typically revolves around one primary legal contract: the Residential Contract of Purchase. The Virginia Realtors® form is one of the most often used templates for this contract. But other templates may be used for the same purpose, such as the Virginia Residential Purchase and Sale Agreement or a general Virginia Residential Purchase Agreement, which is often used by homeowners trying to sell their homes without an agent. These templates may have different names, but they’re all used for the same purpose: to establish a legally binding contract between the buyer and seller of a home in Virginia.
There are several important terms covered by the Residential Contract of Purchase. Virginia real estate agents should be familiar and comfortable with each section of the Contract.
Identity of the parties to the contract and the property
This is the most basic part of the Residential Contract of Purchase: properly identifying each of the parties and the property. Not only will the buyer(s) and seller(s) be named and identified by current address, but their chosen real estate representation will also be identified by company.
The real property (land and structures) will be thoroughly identified by legal description and address. And personal property (personal items to remain on the property as part of the sale) will also be specifically identified. This section allows the parties to agree to include appliances, light fixtures, window coverings, and even furnishings in the sale of the property.
Price, Deposit, and Financing
The purchase price will be clearly documented. The Contract also outlines how the buyers plan to pay the purchase price. If using a mortgage loan, the amount of the loan and interest rates will be disclosed. If using seller financing, the terms will be clearly defined.
There is also a section explaining the deposit: how much the deposit will be, how it will be paid, and who the deposit will be held by. This section also dictates what happens to the deposit in the event that the sale is canceled by either party before closing.
These sections contain important information about the timing of financing as well. The buyers are responsible for securing financing within a specific number of days and paying the balance a specific number of days before closing.
Title and Closing
There is a section briefly explaining title insurance, which protects the buyers in the event that someone else makes a claim on the property.
Then there are several sections to address closing or “settlement”. Timing is important in real estate transactions because there are a lot of moving parts that all need to be completed during the roughly 30 to 60-day escrow period. A delay on a single item can push back the closing date, which creates headaches for everyone involved. Pay attention to timing outlined in the Contract.
One notable section pertains to “expenses, prorations, and rollback taxes”. This section outlines who pays for what in terms of surveys, inspections, taxes already incurred but not yet paid (or paid but not yet incurred), and any fuel/propane present in any onsite tanks.
Condition and Inspection
There are a few sections of the contract used to outline the expectations regarding the condition of the property and the inspection options available to buyers.
Generally, the sellers are expected to maintain the condition of the property through closing. Buyers should expect to find the home on closing day in the same condition it was in when they last saw it.
While a home inspection is generally optional for buyers, it is always the best option. Spending a few hundred dollars to have a professional inspect the property and notify you of any visible issues is money well-spent.
While Virginia is a known “Buyer Beware” state, there are a few mandatory disclosures included in the Contract.
For example, sellers must disclose whether or not the property is considered a condominium and whether or not a property is part of a property owner’s association.
And finally, there are a few additional sections to cover items like default, non-binding mediation, and miscellaneous.
Possible Amendments to the Residential Contract of Purchase
As mentioned, the Virginia Residential Contract of Purchase is the primary legal contract between buyers and sellers, but there may be amendments to the Contract. Here are the most common amendments.
If the seller is not willing to accept the original offer price or terms, they can complete a counteroffer amendment with their preferred terms. The buyer will have the right to either accept this counteroffer, counter the counteroffer, or decline the counteroffer. Either way, all counteroffers are amendments to the Residential Contract of Purchase.
Amendments to change the price or terms
It’s not uncommon for the price or terms of the contract to change following the home inspection. A home inspection may uncover unexpected issues that will need to be addressed. So the buyer may request that the seller either repair the concerning items or reduce the price of the house to reflect the poorer-than-expected condition. The agreed-upon changes to the original terms will be outlined in an amendment to the contract.
Standard Virginia Disclosures
In addition to the primary contracts that legally outline the real estate transaction, several disclosure forms are fairly common when purchasing a residential property in Virginia.
Mandatory Residential Property Disclosure Statement
Virginia is a “Buyer Beware” state. The seller has no legal obligation to disclose information regarding the condition of the property, neighboring properties, sexual offenders living nearby, etc. The buyer is responsible for having a thorough inspection completed and doing all the research on their own.
But sellers are required to disclose this fact in a Mandatory Seller Disclosure, which simply explains that the sellers are responsible for researching and inspecting the property and surroundings and coming to their own conclusions.
Having said that, there are some serious property issues that do legally require disclosure. Let’s look at some of them.
Lead-Based Paint Disclosure
The Lead-Based Paint Disclosure is used to warn buyers that lead-based paint may still be present in the home. Depending on which template you use for your Residential Contract of Purchase, this disclosure may be covered by your contract. Or you might need to have a separate disclosure form.
Septic System Repair Disclosure
If the property is on a septic system (as opposed to a city sewer system), and needs repair or maintenance, this fact must be disclosed to the buyer with a Septic System Repair Disclosure.
Defective Drywall Disclosure
Defective drywall, meaning drywall that contains excessive sulfur or has been designated by the U.S. Consumer Product Safety Commission as being hazardous, must be disclosed using a Defective Drywall Disclosure Statement. This only applies if the seller is aware of the defect.
Building Code or Zoning Ordinance Violations Disclosure
If the seller has been notified of a pending building code enforcement action or has a pending violation of any zoning ordinance, they must notify the buyer using a Disclosure Statement for Pending Building Code or Zoning Ordinance Violations.
New Dwelling Disclosure
New construction properties may require an additional Disclosure Statement for Certain New Dwellings. This is only required if the seller is aware of any material defects in the new construction home or is aware of the presence of any abandoned mines, shafts, or pits.
If the property has been used to manufacture meth and has not been cleaned in accordance with state guidelines, the Disclosure Statement for Residential Property Previously Used to Manufacture Methamphetamine must be completed. If however, the property has been cleaned in accordance with state guidelines, the seller is not required to disclose the fact that the property was used to manufacture meth.
Military Air Installation Disclosure
Because of the noise and “accident potential” associated with military air installations, sellers must disclose to buyers if the property is located in either a Noise Zone or Accident Potential Zone (APZ). The Disclosure Statement for Properties Located in a Locality in which a Military Air Installation is Located is the form used to satisfy the legal disclosure requirement.
Don’t Forget About Loan Docs!
In most cases, the buyer will need to secure financing from a lender to purchase the property. This comes with an entirely separate set of contracts and documents, collectively referred to as “loan docs”. Since these are just between the buyer and the lender, we won’t discuss them at length here. But it’s important to know that these loan docs must all be signed and notarized before the funding can be processed and the real estate transaction can close.