Learning the Basics of Real Estate Contracts
By admin on Sep 25, 2010 in Real Estate Guide
Real estate contracts are usually based on common law contract principles. Contract is drafted in the form of an offer and signed by the buyer who is deemed the ‘offerer’. An acceptance is made if the seller agrees to the exact terms and conditions, and the offer is not binding until this happens.
If the seller wants to change something, like the date to close the deal or any other detail, that is considered to be a counter-offer. Even the smallest detail in each offer must be strictly adhered to if the deal is not to be invalidated. For instance, if the offer states that it must be accepted by mail, then phone will not do.
A real estate contract is called a ‘bi-lateral’ agreement because both parties want and agree to perform a buying or selling action. A ‘uni-lateral’ agreement is one in which the seller is obligated to sell for some reason, but the buyer is not obligated to buy; his buying activity is a free-will choice.
Learning the Basics of Real Estate Contracts:
To make a real estate contract valid, certain protocols must be adhered to.
The Basics of Real Estate Contracts Terms:
• There must be ‘mutual agreement’.
• Both offer of sale and offer to buy must be in writing. If either part is an oral agreement it is not binding.
• Both parties must be identified in the Real Estate Contracts. Full names and middle initials must be used. If the parties are corporations, that must be stated with full company title.
• The property must be properly identified with postal address and shire map. ‘My seaside home’ is not good enough.
• Purchase price or else the appraised value must be clearly stated.
• There must be ‘consideration’ for the Real Estate Contracts to be enforceable. Consideration is a nominal sum of money.
• Only parties of legal age and sound mind are allowed sign it.
Certain subjects can and should be added to a Real Estate contract. The most important one is that the offer will only be accepted ‘subject to lawyer’s approval as to form and content by (due date)’. The time limit should be 24-48 hours.
Other subjects can be:
‘Subject to financing’: – You can’t know for sure that a person’s credit is good until the bank says so.
‘Subject to inspector’s report’: – Some lending facilities require a termite inspection before approving a mortgage.
‘Subject to Sale of Purchaser’s home or Parent’s approval’: – These are risky ones that it is best to disagree to or walk away from. It could take forever for either to occur.
Escape clause: This is an important part of any Real Estate contract, especially from the seller’s point of view. It should state that the vendor has a right to continue showing the property and if another offer is received the purchaser will be notified and given 24 hours to waive the condition or original agreement will be made null and void. The seller can then accept a better offer with his own “subject to original purchaser cancelling contract.” Of course the seller must then notify the buyer and give them 24 hours to remove or satisfy their own ‘subjects’ before you cancel the original contract and refund the deposit.