A real estate Contract is a document between two parties that establishes terms and conditions for the purchase and sale of property. It can be a legally binding agreement, requiring compliance with applicable laws and regulations. For a real estate contract to be valid, it must contain several essential elements including a legal purpose, legally competent parties, agreement by offer and acceptance, consideration and consent. In addition, a contract that contains any fraud by either party or is in violation of existing law will be invalidated.
A common feature of real estate contracts is the ability to add a rider or an addendum that specifies additional information not included in the main body of the contract. This is especially useful for addressing any unique aspects of the transaction or clarifying any unclear points in the contract. Examples of this include an addendum regarding environmental inspections or information about a homeowners association, if applicable.
In most jurisdictions, real estate contracts must be in writing to be enforceable. This is because real estate transactions are usually more complex than other types of sales, and as a result, there are more opportunities for miscommunication or disagreements. For this reason, it is important for both buyers and sellers to have a written document that clearly outlines the details of the transaction.
The process of building a real estate contract begins when the buyer submits an official offer letter to the seller. The seller then has the option to accept, reject or counter the offer. In the event of a counter, the seller and buyer may negotiate on items such as the purchase price, closing costs or contingencies. Once the parties agree on final terms, they must sign the contract to make it binding.
Although not required in all states, the signatures on a real estate contract are typically notarized. This is done to ensure that the party signing the contract is legally capable of doing so. In addition, the notary can verify that the signatures on the contract match the names of the parties.
Another important aspect of a real estate contract is its provisions for termination and damages. For example, if the property turns out to be infested with termites or the buyer can’t obtain financing, the contract provides an opportunity for the parties to terminate the contract and release the earnest money deposit. It is also possible for both parties to sue the other in court if one party breaches the contract.
The final section of a real estate contract lists the date and time for closing on the property. It also indicates who will pay the associated closing costs. The contract should also address any contingencies that the parties have attached to the sale, such as the buyer’s ability to obtain satisfactory inspection results or a loan commitment. For residential properties, mortgage contingencies are very common. In commercial property transactions, financing contingencies are also fairly common.
