Your Real Estate Sales Contract Deserves Your Undivided Attention

by Greg Cryns

What is a real estate sales contract?

It is a legally binding contract between a buyer and a seller of real estate. If you make an offer to pay a designated price for a 

home and the seller accepts the offer, you could be held responsible to, indeed, complete the sale of the house.

A real estate sales contact should not be taken lightly. However, if you have done a thorough inspection of the house you can rest easy because there are other safeguards in place that could provide an escape hatch for you if the house is discovered to be a lemon.

Contingencies

The safeguards are called "contingency clauses". It stands to reason that the purchase of a house must depend on your ability to get a mortgage to pay the money to the seller. Your offer is "contingent" on that event. Other common contingency clauses include inspections.

I accompanied my house inspector when we purchased our home recently. I was pleasantly surprised by his professional and very thorough approach to his work. After two full hours of examining every aspect of the house I came away with a lot of valuable information about house construction.

Another contingency clause says the house must have "clear title." All liens on the property must be paid before the title company will issue insurance that protects the buyer from having to assume financial burdens that belong to the seller.

Contract Ingredients

1. The property in question must have a legal and physical description.

2. The selling price, mortgage loan, down payment and earnest money deposit are clearly stated. The company holding the escrow account is named.

3. The closing date and details about where the closing will be held

4. Clearly defined are detached items that will be included in the sale. These items often become important when negotiating a price. For example, we made an adjustment in our offer after the seller made a counter offer on the price. We named a new higher price offer but we also said that the refrigerator would be included. The seller accepted.

5. Warranties are detailed.

6. Well and septic systems, if any, need to pass inspections.

7. The date the buyer will move into the house. This is important because in today's market sellers are more apt to demand a "rent back" agreement where they will stay in the house after the closing for a specific period of time. We allowed our seller to stay for 19 days. He needed time to find a new house or rental.

8. Most contracts specify how long the seller has to respond to a buyer's offer. This clause protects the buyer from long pauses that could seriously undermine the search for housing if the seller decides not to sell the house.

9. The seller must state any known deficiencies in the house. If there is a problem with the plumbing, for example, it must be described. More often there is a leaky roof that needs attention.

I always recommend that you hire an attorney whether you are a buyer or a seller. Attorneys can be deal killers but they can also save you a lot of grief.

Greg Cryns is the owner of Flat Fee Real Estate Guide - http://www.flatfeerealestateguide.com