A real estate contract is a document that outlines the exchange of a piece of property. It usually contains details about the sale of a home, such as the purchase price, closing date, and who is responsible for paying the closing costs. The document also includes a legal description of the property and a warranty of the condition of the property.
Typically, the contract will be drawn up by one or both parties and then offered to the other party to sign. If the seller is not able to sign the contract, they can hire a power of attorney to do so. This may be useful if the buyer has a mental disability or has an older parent who is unable to sign the document.
Real estate contracts can be voidable if either party violates the law or the contract. Contracts should be signed by a legally competent person and should include an acceptance of the terms and conditions of the agreement. They should also contain a clear statement of consideration. In most cases, the most common form of consideration is money. But other instruments of value can be used as well.
Most real estate contracts include a mortgage contingency. This allows the buyer to apply for a loan, but does not give the seller the right to foreclose on the property. Generally, a lender will not lend more than a certain percentage of the appraised value of the property. However, if the buyer does not qualify for the loan in the specified time frame, they can cancel the contract.
Several other conditions may be included in the real estate contract. These include the condition of the property, the testing of septic tanks and wells, and the insurance coverage of the property. Depending on the terms of the contract, the buyer may be required to pay for a title search. There are also several provisions that will allow the seller to hold over possession of the property in case the buyer does not close on the house.
Some contracts include a “right of cancellation”. Typically, this is a provision that allows the buyer to void the contract if the property is not in the same condition as when the contract was first written. For example, if a septic tank is not inspected by the buyer within a specified period of time, the buyer may be able to terminate the contract. Similarly, if termites are found in the house, the buyer can cancel the contract.
Many residential real estate contracts will also contain information about the buyer’s financing options. Whether the buyer will make a down payment and pay for the mortgage, or will pay with a combination of down payment and mortgage loan, will be indicated in the contract.
As with other contracts, real estate contracts will include details about the inspection of the property. An inspection will be conducted by a professional to determine whether the seller’s claims of the property’s conditions are correct. Afterward, the contract will outline the procedure for arbitration if the buyer breaks the contract.