Your Guide to the Real Estate Contract
What exactly does a real estate contract do? While you don’t have to be an expert in the ins and outs of this important document—that’s the job of your licensed lender—it’s helpful to at least understand the basics. Here are the major functions of a real estate contract:
Tells It Like It Is.
The real estate contract basically lists all the facts about the property so that both the buyer and seller are in mutual agreement. That’s to say, no party should know more or less than the other. That goes for everything from the purchase price to the appliances and furniture included in the sale, a deadline to complete the closing, and other important details.
Makes it Official (in Writing).
A contract for the purchase and sale of real estate (aka a real estate contract) must be in writing to be enforceable. That’s why the piece of paper exists. Even if you agree to purchase a property verbally over the phone or in person, the buyer can’t enforce the sale unless your signature is on that paper.
Has All the Who’s.
A real estate contract must identify the parties involved in the sale, which is a legalese way of saying it must have everyone’s name on it, including those middle initials. If one of the parties is a corporation, it should clearly state the name of the corporation, too (e.g., “Apartment 405, Inc., a Florida Corporation”).
And All the What’s.
Aside from including everyone involved in the sale, a real estate contract must also have the details of the property or properties being sold. To create a binding contract, the description has to be specific, not vague like “my home on the water”. This typically includes the property’s legal description which includes the address, parcel number, plot information and other details.
Show Me the Money, Ahem, Price.
The real estate contract must state the purchase price for the property, which is the amount the buyer is offering to pay the seller.
Includes the Consideration.
This is anything of legal value, such as money, interest or services, that’s in the real estate contract. Whatever it is, it must be clearly spelled out. For the most part though, it will be the buyer’s earnest money (which is different than hard cash), which shows that the buyer is serious about his or her offer.
Your Signature, Please
An unsigned real estate contract is as good as no contract at all. In order to be enforceable, a contract must be signed by parties who are of legal age and sound mind. It’s not usually mandatory to have a notary’s signature or witness, although it may be a good idea, just to have all of your bases covered. You can also fax a signed contract, as long as the contract states that faxed signatures are valid.
In order to be legal and binding, a real estate contract must satisfy all of the above requirements. Once a real estate contract becomes valid, aka legally enforceable, the real estate purchase can move on its way to closing.