A real estate contract is a contract for the purchase or exchange of land and property between parties. The contract can cover a purchase, sale, lease, or rental. It can be between two or more parties and is typically in writing. This type of contract follows normal contract law and legal requirements, and is sometimes known as a land contracts or as a contract for deed.
A real estate contract can be drawn up by both sides collectively and signed, or composed by one side, signed, and offered to the other side for an agreement and signature. Counter offers may be made before the contract is signed by either side. Each additional counter offer, often accompanied by a mark up of the contract, must be initialed if made after signing.
A real estate contract often has many conditions that must be met or maintained for the contract to remain effective. The contract also offers a date of possession, which is usually a time which the contract takes effect and possession of the property is transferred to a signer. Conditions may be added to the contract, and a deposit may or may not be required, depending on the financial reliability of the buyer.
A real estate contract has many requirements, and must include all of following to be considered legal and enforceable: a legal description and street address of the property included in the contract; the selling price or payment agreed upon; specifics of a mortgage (if applicable), including amount, rate, term, and due date; deposit amount; and a closing date for the finalization of the deal and takeover of possession.
Along with these essential details, a real estate contract must outline many of the details that often make or break a deal, and are usually very important to the buyer, including: what is included or excluded from the obvious real estate; the contingency for an inspection and when it is to be performed; a warranty on the land or components of the property; a testing of wells and septic tanks; how long the offer stands before acceptance or a counter offer must be initiated; the insurance coverage of the property between the exchange of possessions; and, very importantly, what process will be used for arbitration if the contract is thought to be broken.
A real estate contract can be between regular citizens and can include the review of a lawyer from one or both sides. All of the terms of the contract must be within the laws of the governing country, and the breaking of a contract will often result in a civil claims lawsuit.
