Real estate contracts are agreements between a buyer and a seller to sell and buy property. They typically contain all the important details about how a home sale will be conducted, including the purchase price, closing costs, earnest money, and more.
Contracts are usually executed in a real estate office. They should be signed by the parties and be recorded with a local courthouse. They also include a description of the property and any other information that a buyer may need to complete the transaction.
The Real Estate Sales Process: Offers, Counteroffers and Closing Costs
In the real estate sales process, the first step is to make an initial offer. This may be done by the seller or their agent. This initial offer will likely be accompanied by a counteroffer with additional terms. If the buyer accepts the offer, the contract will be binding on both parties. If the buyer rejects the offer, the contract will be voided and no further action can be taken by either party.
This initial offer should be accompanied by an earnest money deposit, which is a promise to the seller that the buyer is serious about making a purchase. This amount is typically one or two percent of the total purchase price. This earnest money deposit is held in escrow by a third party and will be credited to the down payment or closing costs at the time of closing.
The offer should also include any contingencies that will need to be met before the deal is closed, such as inspections or title searches. These contingencies are outlined in the contract and must be agreed to by both parties.
Sales contingencies are common in both residential and commercial real estate deals. They often include a period of time during which the buyer can obtain a satisfactory inspection of the property. In addition, they may have a time period during which the buyer can obtain financing to purchase the property.
These contingencies may be quite long, depending on the circumstances. If a buyer is not able to meet these requirements during the contingency period, they can terminate the agreement without penalty.
Real estate contracts can be complicated, especially when there are multiple offers for a single property. In this situation, it is a good idea to add a clause that allows the buyer to “escalate” their offer above any competing offers. This will help the seller compare the buyer’s offer to other offers and ensure that they are getting the best value for their property.