A real estate Contract is an agreement between two parties regarding the sale of a property. These contracts are often complex due to the many details involved in a real estate transaction. However, by following a few simple guidelines, these contracts can be easily constructed and effective. These include: an offer, acceptance, consideration, and legal capacity of the parties. These contracts also typically include certain contingencies, which allow the parties to walk away from the agreement if they do not meet specific conditions.
The first step in building a real estate Contract is submitting an official offer letter to the seller. This may begin a negotiation process, where the buyer and seller will exchange counter-offers to adjust items like purchase price, closing costs, and contingencies. Once the parties have agreed on the final terms, they can then sign and date the contract.
A real estate contract should clearly state the price of the property and all fees related to the sale. This includes the purchase price, real estate taxes, title insurance, and closing fees. The contract should also state the amount of earnest money, if applicable. This deposit is a good-faith deposit that shows the seller that the buyer is serious about purchasing the property and can be used to cover some or all of the seller’s losses if the buyers ultimately back out of the deal.
Other important items in a real estate contract include the inclusions and exclusions of the property. This is especially important in residential spaces, as it can help to define what exactly will be included with the sale. In commercial space, this can be more complicated, as the structure is often built for a specific purpose in mind and thus is not intended for general use.
These real estate contracts are normally bilateral, requiring the signature of both parties. They should be written using everyday language and avoid abbreviations, as this will make it easier for all parties to understand the terms of the agreement. This will also help to prevent misunderstandings and disputes down the line. Real estate contracts are also typically time-sensitive, and the agreement should include an expiration date.
A real estate contract should also contain any contingencies that the parties wish to include. These are essentially conditions that must be met in order for the contract to be enforceable. For example, a common contingency is that the buyers must obtain financing for the purchase of the property within a certain period of time after signing the contract. The contract can then be canceled if the financing does not go through. Other types of contingencies include inspection contingencies, zoning and environmental contingencies, and mortgage contingencies. These contingencies usually include a deadline, and if not met, the contract can be terminated by either party. There are also rider clauses that can be added to a real estate contract, such as a homeowner’s association rider or a Federal Housing Administration rider specifying that the home is eligible for an FHA loan.
