Enter the complicated world of real estates


Real estate purchase/sale contract

A real estate contract is a contract forconsideration for the real estate, which
the purchase/sale, exchange, or otheris typically money in the amount of the
conveyance of real estate betweenpurchase price. However, the details
parties. Real estate called leaseholdabout the type of ownership may not be
estate is actually a rental of realspecified in the contract. Sometimes,
property such as an apartment, andsigning buyer(s) may direct a lawyer
leases (rental contracts) cover suchpreparing the deed separately what type
rentals since they typically do notof ownership to list on the deed and may
result in recordable deeds. Freeholddecide to add a joint owner(s), such as
("More permanent") conveyances of reala spouse, to the deed. For example,
estate are covered by real estatetypes of joint ownership (title) may
contracts, including conveying feeinclude tenancy in common, joint tenancy
simple title, life estates, remainderwith right of survivorship, or joint
estates, and freehold easements. Realtenancy by the entireties. Another
estate contracts are typically bilateralpossibility is ownership in trust
contracts (i. e., agreed to by twoinstead of direct ownership.
parties) and should have the legalContingencies
requirements specified by contract lawContingencies are conditions which must
in general and should also be in writingbe met if a contract is to be performed.
to be enforceable.Contingencies that suspend the contract
Details explained on the contractuntil certain events occur are known as
In writing"suspensive conditions". Contingencies
In many countries, real estate contractsthat cancel the contract if certain
must be in writing to be enforceable. Inevent occur are known as "resolutive
the United States the Statute of Fraudsconditions".
require real estate contracts to be inMost contracts of sale contain
writing to be enforceable. In Southcontingencies of some kind or another,
Africa, the Alienation of Land Actbecause few people can afford to enter
specifies that any agreement of sale ofinto a real estate purchase without
immovable property must be in writing.them. But it is possible for a real
Additionally, a real estate contractestate contract not to have any
must:contingencies.
Identify the parties: The full name ofSome types of contingencies which can
the parties must be on the contract. Inappear in a real estate contract
a sales contract, the parties are theinclude:
seller(s) and buyer(s) of the realMortgage contingency - Performance of
estate, who are often called thethe contract (purchase of the real
principals to distinguish them from realestate) is contingent upon or subject to
estate agents, who are effectively theirthe buyer getting a mortgage loan for
intermediaries and representatives inthe purchase. Usually such a contingency
negotiation of the price. If there arecalls for a buyer to apply for a loan
any real estate agents brokering thewithin a certain period of time after
sale, they are typically listed also asthe contract is signed. Since most
the real estate brokers/agents who wouldpeople who buy a house get a mortgage
earn the commission from the sale.loan to finance their purchase, mortgage
Identify the real estate (property): Atcontingencies are one of the most common
least the address, but preferably thetype of contingencies in real property
legal description must be on thecontracts.
contract.Inspection contingency - Purchase of the
Identify the purchase price: The amountreal estate is contingent upon a
of the sales price or a reasonablysatisfactory inspection of the real
ascertainable figure (an appraisal to beproperty revealing no significant
completed at a future date) must be ondefects. Contingencies could also be
the contract.made on the satisfactory repair of a
Include signatures: A real estatecertain item associated with the real
contract must be entered intoestate.
voluntarily (not by force), and must beanother sale contingency - Purchase or
signed by the parties, to besale of the real estate is contingent on
enforceable.a successful sale or purchase of another
Have a legal purpose: The contract ispiece of real estate. The successful
void if it calls for illegal action.sale of another house may be needed to
Involve Competent parties: Mentallyfinance the purchase of a new one.
impaired, drugged persons, etc. cannotappraisal contingency - Purchase of the
enter into a contract. Contracts inreal estate is contingent upon the
which at least one of the parties is acontract price being at or below a fair
minor are voidable by the minor.market value determined by an appraisal.
Reflect a meeting of the minds: EachLenders will often not lend more than a
side must be clear and agree as to thecertain percentage (fraction) of the
essential details, rights, andappraised value, so such a contingency
obligations of the contract.may be useful for a buyer.
Include Consideration: Consideration is72-hour kick out contingency - Seller
something of value bargained for incontingency, which allows the seller to
exchange of the real estate. Money iskeep the property in the market while
the most common form of consideration,the buyer contingencies are not yet
but other consideration of value, suchfulfilled.
as other property in exchange, or aDate of closing and possession
promise to perform (i.e. a promise toA typical real estate contract specifies
pay) is also satisfactory.a date by which the closing must occur.
Notarization by a notary public isThe closing is the event in which the
normally not required for a real estatemoney (or other consideration) for the
contract, but many recording officesreal estate is paid for and title
require that a seller's or conveyor's(ownership) of the real estate is
signature on a deed be notarized toconveyed from the seller(s) to the
record the deed. The real estatebuyer(s). The conveyance is done by the
contract is typically not recorded withseller(s) signing a deed for buyer(s) or
the government, although statements ortheir attorneys or other agents to
declarations of the price paid arerecord the transfer of ownership. Often
commonly required to be submitted to theother paperwork is necessary at the
recorder's office.closing.
Sometimes real estate contracts willThe date of the closing is normally also
provide for a lawyer review period ofthe date when possession of the real
several days after the signing by theestate is transferred from the seller(s)
parties to check the provisions of theto the buyer(s). However, the real
contract and counterpropose any that areestate contract can specify a different
unsuitable.date when possession changes hands.
If there are any real estate brokersTransfer of possession of a house,
agents brokering the sale, the buyer'scondominium, or building is usually
agent will often fill in the blanks on aaccomplished by handing over the key(s)
standard contract form for the buyer(s)to it. The contract may have provisions
and seller(s) to sign. The brokerin case the seller(s) hold over
commonly gets such contract forms from apossession beyond the agreed date.
real estate association he/she belongsThe contract can also specify which
to. When both buyer and seller haveparty pays for what closing costs. If
agreed to the contract by signing it,the contract does not specify, then
the broker provides copies of the signedthere are certain customary defaults
contract to the buyer and seller.depending on law, common law (judicial
Offer and acceptanceprecedents), location, and other orders
As may be the case with other contracts,or agreements, regarding who pays for
real estate contracts may be formed bywhich closing costs.
one party making an offer and anotherCondition of property
party accepting the offer. To beA real estate contract may specify in
enforceable, the offers and acceptanceswhat condition of the property should be
are normally in writing and signed bywhen conveying the title or transferring
the parties agreeing to the contract.possession. For example, the contract
Often, the party making the offermay say that the property is sold as is,
prepares a written real estate contract,especially if demolition is intended.
signs it, and transmits it to the otherAlterrnatively there may be a
party who would accept the offer byrepresentation or a warranty (guarantee)
signing the contract. As with all otherregarding the condition of the house,
types of legal offers, the other partybuilding, or some part of it such as
may accept the offer, reject it - inaffixed appliances, HVAC system, etc.
which case the offer is terminated, makeSometimes a separate disclosure form
a counteroffer - in which case thespecified by a government entity is also
original offer is terminated, or notused. The contract could also specify
respond to the offer - in which case theany personal property (non-real
offer terminates by the expiration dateproperty) items which are to be included
in it. Before the offer (orwith the deal, such as washer and dryer
counteroffer) is accepted, the offeringwhich are normally detachable from the
(or countering) party can withdraw it. Ahouse. Utility meters, electrical wiring
counteroffer may be countered with yetsystems, fuse or circuit breaker boxes,
another offer, and a counterofferingplumbing, furnaces, water heaters,
process may go on indefinitely betweensinks, toilets, bathtubs, and most
the parties.central air conditioning systems are
To be enforceable, a real estatenormally considered to be attached to a
contract must possess originalhouse or building and would normally be
signatures by the parties and anyincluded with the real property by
alterations to the contract must bedefault.
initialed by all the parties involved.Riders
If the original offer is marked up andRiders are special attachments (separate
initialed by the party receiving it,sheets) that become part of the contract
then signed, this is not an offer andin certain situations.
acceptance but a counter-offer.Earnest money deposit
Deed specifiedAlthough, it is not absolutely required
A real estate contract typically doesfor a valid real estate offer or a
not convey or transfer ownership of realcontract, an earnest money deposit from
estate by itself. A different documentthe buyer(s) customarily accompanies an
called a deed is used to convey realoffer to buy real estate. The amount, a
estate. In a real estate contract, thesmall fraction of the total price, is
type of deed to be used to convey thelisted in the contract, with the
real estate may be specified, such as aremainder of the cost to be paid at the
warranty deed or a quitclaim deed. If aclosing.
deed type is not specifically mentioned,Financial qualifications of buyer(s)
"marketable title" may be specified,The better the financial qualification
implying a warranty deed should beof the buyer(s) are, the more likely the
provided. Lenders will insist on aclosing will be successfully completed,
warranty deed. Any liens or otherwhich is typically the goal of the
encumbrances on the title to the realseller. Any documentation demonstrating
estate should be mentioned up front infinancial qualifications of the
the real estate contract, so thebuyer(s), such as mortgage loan
presence of these deficiencies would notpre-approval or pre-qualification, may
be a reason for voiding the contract ataccompany a real estate offer to buy
or before the closing. If the liens arealong with an earnest money check. When
not cleared before by the time of thethere are competing offers or when a
closing, then the deed shouldlower offer is presented, the seller may
specifically have an exception(s) listedbe more likely to accept an offer from a
for the lien(s) not cleared.buyer demonstrating evidence of being
The buyer(s) signing the real estatewell qualified than from a buyer without
contract are liable (legallysuch evidence.
responsible) for providing the promised



1 A B C D E F 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137