What Is a Real Estate Contract?

A real estate contract is a written agreement between two or more parties involved in the purchase and sale, exchange or transfer of property. It defines the terms of the transaction, including the price, earnest money deposit, closing costs and settlement date. It also outlines the legal rights and obligations of each party in the transaction, including the ability to sue if the other party breaches its duties under the contract.

The Laws of Contract:

The first and most basic requirement for any legal contract is that it must have a legal purpose, legally competent parties, an agreement by offer and acceptance, consideration, and consent. Consideration can be anything that is of value to one party in a particular deal, and it includes things like money, services, goods, or love and affection.

An essential part of any contract is that the parties agree to it by signing their names. This is done so the contract is legally binding, making it enforceable by law.

When negotiating a real estate contract, it is important to review the terms carefully. These terms are critical to the success of the transaction and should be outlined clearly in the contract, so that both parties understand the details of the contract.


Many real estate contracts include contingencies that define the factors that could influence the deal. These factors can be as simple as a home inspection, or more complicated such as the buyer getting approved for a mortgage.

Closing Costs:

A real estate contract should specify who is responsible for the closing costs, such as title search fees and home inspection fees. Often, sellers will cover these costs, but it is always good to make sure that this is clearly spelled out in the contract so that both parties know who is responsible for what.


The home warranty is an optional component of the purchase agreement that can help to protect buyers against future repair costs. It is recommended that a real estate contract contain a warranty for any item or system in the property, so that buyers can be sure they are not liable for future repair costs on the item.


If an important piece of information is necessary to complete the transaction, such as rules and regulations for a homeowner’s association or the availability of Federal Housing Administration loans, riders can be added to the real estate contract.

Buyer and Seller Information:

A real estate sales contract should provide detailed information about both the buyer and seller. This information should include names, current home addresses, and contact information for both parties. The contract should also outline the details of the purchase and include a section where the parties can record their signatures to make it legally binding.


It is very common for real estate contracts to include what happens if one or more of the parties fails to comply with their obligations under the contract. This helps set expectations for the parties and avoids the need for court proceedings if something goes wrong during the negotiation or closing stages of the sale.

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