A real estate contract, also known as a purchase and sale agreement or a sales contract, is an important document for anyone that invests in property. It can be written on a variety of terms, but the key to a successful real estate contract is that it should be understood by all parties involved. This means using everyday language, avoiding abbreviations, and reviewing potentially confusing areas. In addition, it should include a timeline and specify what will happen if a deadline is not met.
Real estate contracts can be used to buy and sell anything that has a legal value. This includes land, houses, apartments, commercial properties, and even mobile homes. Real estate transactions usually require extensive paperwork, and a well-drafted contract will help ensure that everyone understands their rights and obligations. In order to be enforceable, a real estate contract must have an offer and acceptance, consideration (or something of value exchanged for the promise to perform), and a meeting of the minds between the parties.
A standard real estate purchase and sale agreement contains basic information about the property, such as its address and price. However, there are many other items that can be included in a contract, including contingencies, inspection details, and financing clauses. Contingencies are the conditions that must be met in order to close on a property. They are a great way to protect buyers from being forced into a transaction they do not want or can afford.
The most common contingencies in a purchase and sale agreement are associated with home inspections. If the home is found to be in need of significant repairs, the buyer may choose to walk away from the deal. Adding an inspection contingency to the contract allows buyers to hire a professional inspector to assess the property before making an offer. The contingency could also state that the contract is contingent upon a satisfactory home inspection within a certain time frame.
Other common real estate contract contingencies include a title search and a mortgage contingency. A title search checks public records to find out if the property is legally owned by the seller. If it is not, the contract must be renegotiated to include a transfer of ownership or a warranty of title. A mortgage contingency specifies that the sale will be finalized only when a buyer is able to obtain a loan from a bank.
A power of attorney is another common real estate contract contingency. This can be useful if one of the parties is unable to sign the contract, such as a person with a mental disability or someone who is living in a nursing home. A power of attorney allows a third party to act on behalf of the person who cannot sign the contract, and it will be considered valid. A standard form of power of attorney should be included with any real estate contract. Other addendums, which are sometimes called riders, can also be added to the purchase and sale agreement. These can include information about homeowner’s association rules, a rider specifying that the contract is contingent upon a successful Federal Housing Administration loan, and seller assist, which allows sellers to absorb some of the closing costs.