A real estate purchase contract enumerates the participating parties’ — could be two or more — responsibilities during the period the property is taken off the market. It must be signed by both parties (buyer and seller), and it’s required by the United States Statute of Frauds to be enforceable. In essence, a real estate purchase contract is a binding, bilateral agreement with legal capacity to buy, exchange or transfer real property. Take note that the contract is based on a legal consideration, meaning that consideration is a medium of exchange for the property being purchased, which in most cases is money. There are other forms of consideration such as a promise to pay, or a property in exchange.
What does a real estate purchase contract contain?
The agreed upon purchase price and corresponding terms
The amount of the deposit
The essential details, rights, and obligations of the contract
Real estate taxes and special assessments
The condition of the property, what is included, and what is not included
Closing date and costs (and who shoulders them)
Terms of possession and contingencies that must be met
What is a contingency and what should be listed in this clause?
Contingencies serve as a preparation for the possibility of operational problems. The more thorough and defined a contingency clause is, the more it minimizes the potential loss for both parties. In the case when a contract is already in the works, a settlement contingency is used. This protects the buyer if the sale fails since the property is not really sold until the settlement or closing is finalized. In most cases, this type of contingency forbids the seller from accepting other offers on the property for a specific period. If the buyer’s home closes by the specified date, the contract remains valid. If the home does not close, the contract can be terminated.
Here are the common items listed in the contingency clause:
