1. Real Estate Agreements- Once you’ve signed, there’s no going back
A sales agreement, also referred to as a purchase and sale agreement, a real estate contract, a purchase contract, or a sale contract agreement, is a binding legal document. Once you’ve signed it, you are bound by the terms of the document and any promises you’ve made within it. (For a discussion of when you may be held responsible for verbal promises made to the buyer or seller, see below). Even if you think you have a good reason for violating the terms of the agreement or for refusing to go through with the deal, a court can compel you to complete the transaction and compensate the other party for any financial losses that he or she incurred as a result of your actions.
2. Real Estate Agreements- Always have a contingency plan
As discussed above, a real estate contract is a legal document that binds the signatories to certain obligations. A real estate contract holds the buyer to his promise to buy, and the seller to his promise to sell. But what if the buyer can’t round up enough money to pay for the home? What if the seller performs a title search and discovers the house he is selling is situated on three acres when both he and the buyer thought it was five acres? A well-crafted real estate contract will plan for these contingencies and give the contracting parties the power to terminate the contract when they arise. A poorly-drafted real estate contract will not provide for foreseeable problems like these and may cause the parties to end up in court. For a list of the most common contingency provisions, see below.
3.Real Estate Agreements- An ounce of prevention is worth a pound of cure
Legal advice is most helpful – and least expensive – when sought as a preventative measure. A well-negotiated real estate contract will protect your interests and help you avoid a last-minute crisis that might delay the closing or initiate litigation. Real estate disputes due to a breach of real estate contract are costly and can take years to resolve. So why not take a few steps upfront if it means keeping you out of the courthouse? If you are a buyer, you will want your real estate attorney to enter the process when you are ready to make an offer, or at the very least before you sign the real estate contract. If you are a seller, you will want to consult a real estate attorney before signing a listing agreement with a realtor.
4. Your real estate agreements can encompass verbal promises as well as written ones
Many kinds of contracts don’t have to be in writing to be valid. If a seller verbally promises to fix a leaky basement prior to closing, the buyer may be able to insist that the system be updated even if the matter doesn’t arise in later negotiations and isn’t mentioned in the sales agreement. The best practice is to require that all agreements be in writing to maximize the likelihood of full contractual performance and minimize any misunderstandings.
5. Your real estate agreements should contain a number of standard provisions
A sales agreement can be tailored to include any number of special items, but the following items should always be included:
- the date of the contract
- the real estate closing date
- the purchase price of the property
- a legal description of the property
- the amount of the down payment
- the terms of any escrow agreement
6. Your sales agreement should set forth specific rights and responsibilities
In addition to some standard provisions like the closing date or purchase price, a sales agreement should also embody the result of any bargaining between the buyer and the seller with regard to rights and responsibilities. For example:
- Who is going to pay the utility bills, property taxes, and insurance on the property through the closing date?
- When will the buyer be allowed to take possession of the property?
- If the seller does not move out on time, will there be consequences?
- Will any items presently on the property be included in the sale? (such as furnishings, appliances, outdoor improvements, etc.)
- Has the seller promised to make any repairs to the property?
- If the repairs are not made, what are the consequences?
7. Your real estate agreements should contain contingency provisions
Contingency provisions outline the circumstances under which the real estate contract becomes unenforceable after both the buyer and seller have signed it. Without contingency provisions, a buyer can be forced to forfeit his deposit under certain circumstances if he or she backs out of a deal. Most sales agreements include three standard contingencies:
- A financing contingency making the validity of the sales agreement dependent on the buyer’s ability to obtain a satisfactory mortgage
- An inspection contingency, which makes the validity of the sales agreement dependent on the results of a professional inspection of the property
- An attorney-approval contingency, which makes the validity of the sales agreement dependent upon the subsequent approval of the sales agreement by both parties’ attorneys
- Buyers and sellers are not limited to the aforementioned types of contingency provisions and should work closely with their attorney to negotiate a sales agreement that offers as many safeguards as possible
If you’ve already signed a real estate contract and have a question about your rights, don’t hesitate another minute. Schedule your own free, no-obligation consultation in our Hartford office by calling toll free at 888-336-1212 between 9:00 and 5:30 Monday through Friday, or by clicking here to use our interactive calendar.