Real estate contracts explained
Understanding real estate contracts
Selling a house can be a complex process, and at the heart of this process lies the real estate contract. When you’re selling your house, you need to understand real estate contracts. In this comprehensive guide, we'll explore everything you need to know about real estate contracts—what they are, what to look for, typical terms and agreements, and how We Buy Ugly Houses® can simplify the process for you.
What are real estate contracts?
A real estate contract, also known as a home-selling contract, is a legally binding document that plays an important role in real estate transactions. It outlines the terms and conditions agreed upon by the seller and buyer, ensuring that both parties understand their rights and responsibilities. A home-selling contract must meet the following requirements:
-
Offer: The initial proposal made by one party to the other, detailing the terms of the sale.
-
Acceptance: The agreement by the other party to the terms of the offer, leading to mutual consent. Both parties must sign the acceptance.
-
Consideration: Something of value exchanged between the parties, often in the form of money or a promise.
-
Legal capacity: All parties involved must have the legal capacity to enter into a contract. This means they should not be mentally impaired or minors.
-
Legality of purpose: The contract should not call for any illegal actions.
Types of real estate contracts
Real estate contracts come in various forms to cater to different aspects of property transactions. Here are some common types:
-
Purchase agreement: This is the most common type of real estate contract, specifying the details of the property sale, including the address, price, names of both parties, signatures, and the closing date.
-
Real estate assignment contract or contract for deed: This type of contract is used when one party assigns their rights or obligations to another party.
-
Lease agreement: A contract that binds a property owner (landlord) and a renter (tenant) to the property, outlining terms such as monthly rent and responsibilities.
-
Power of attorney: While not typically used in real estate contracts, it allows someone to act on behalf of another party, which can be useful in specific situations, such as when a party is unable to sign due to physical absence or mental disability.
What to look for in a real estate contract
When entering a real estate contract, there are several key factors to consider:
-
Financing terms: Specify the terms of the offer, whether it is contingent upon securing buyer financing, and if so, what type of loan is needed.
-
Seller assist: Determine if you, the seller, will contribute to closing costs, and outline which specific costs will be covered. This can include escrow fees, title insurance, title search fees, notary fees, transfer tax, and recording fees.
-
Closing costs: Define who is responsible for common fees like escrow fees, title insurance, title search fees, notary fees, transfer tax, and recording fees.
-
Home inspection: Consider including a home inspection contingency to allow the buyer to back out if significant flaws are found during inspection.
-
Fixtures and appliances: Clearly state which fixtures and appliances are included in the property purchase to avoid disputes later on.
-
Closing date: Set a realistic closing date, considering factors like if you need to find a new house and the buyer's current living situation.
-
Sale of existing home: If selling your current house is necessary to purchase another, include a contingency that outlines the timeframe for selling your existing property.
Typical terms found in real estate contracts
Real estate contracts often contain several standard terms and agreements, including:
-
Disclosures: These documents highlight past and present defects of the property, helping to avoid potential legal issues. Disclosure requirements vary by state.
-
"Clear title" requirement: Ensures that the seller is the sole owner of the property without any third-party claims.
-
Cancellation provisions: Allow the buyer to cancel the agreement within a specified timeframe if the property inspection reveals issues.
-
Earnest money deposit: Also known as a good faith deposit, this is a money deposit that acts as insurance for sellers and demonstrates the buyer's commitment to the purchase. The amount can vary but is typically 1%–3% of the sale price of the property. Earnest money deposits will go toward the closing costs when the sale is finalized and are typically refundable when there are contingencies in place.
How to simplify your real estate contract
We Buy Ugly Houses® is here to be your alternative option that offers a hassle-free solution when real estate contracts seem too daunting to do yourself. While real estate agents and attorneys can help you sell, their services come at a cost. Our 3-step selling process makes selling your house easy and hassle-free:
-
Free consultation: We start with a no-obligation consultation to understand your selling needs and evaluate your property.
-
Fast offer: We provide a fast offer for your home based on its condition and market value.
-
Flexible closing: We can sometimes close the deal in as little as 3 weeks, handling all the paperwork without charging commissions or hidden fees. We also pay typical closing costs.†
When you work with We Buy Ugly Houses, you can sell your property quickly and efficiently, while we help guide you through the complexities that come with real estate contracts. Don't let complicated contracts hold you back. We’re here to help every step of the way. Contact us today to get started on a stress-free home-selling journey.
This blog is for informational purposes only and should not be considered legal advice.
