Real Estate Contract
Understand what your real estate contract really says before you sign.
See What You're Missing in Your Real Estate ContractA real estate contract is the agreement between a buyer and seller for the purchase or sale of property. This is likely one of the largest financial transactions you will ever make, and the contract terms determine everything from the closing timeline to what happens if the inspection reveals problems.
Real estate contracts are built around contingencies -- conditions that must be met for the deal to close. Financing contingencies, inspection contingencies, and appraisal contingencies protect the buyer, but only if they are properly drafted with clear timelines and exit rights. Understanding how these contingencies work is essential to protecting your investment. This is informational, not legal advice.
Key Risks to Watch For
Waived or Weak Inspection Contingencies
In competitive markets, buyers sometimes waive inspection contingencies. This means you are committing to purchase the property regardless of what an inspection might reveal. Even if you do not waive, make sure the contingency gives you a meaningful right to negotiate repairs or exit the deal.
Tight Financing Contingency Deadlines
If the financing contingency expires before your mortgage is fully approved, you could lose your earnest money deposit if the loan falls through. Make sure the timeline is realistic for your lender's approval process.
Seller Disclosure Gaps
Sellers are generally required to disclose known material defects, but the scope of disclosure varies by jurisdiction. If the contract limits the seller's disclosure obligations, you may have less recourse if problems emerge after closing.
Unclear Closing Cost Allocation
Who pays for title insurance, transfer taxes, inspection fees, and other closing costs can add up to thousands of dollars. Make sure the contract clearly allocates these costs so there are no surprises at closing.
Related Contract Clauses
Learn more about specific clauses commonly found in real estate contracts:
Frequently Asked Questions
What is a real estate contract?
A real estate contract is a legally binding agreement between a buyer and seller for the purchase and sale of property. It specifies the purchase price, closing date, contingencies, disclosures, and other terms that govern the transaction from offer acceptance through closing.
What should I look for in a real estate contract?
Focus on the purchase price and earnest money deposit, contingencies (inspection, financing, appraisal), seller disclosures about the property's condition, closing date and timeline, closing cost allocation, and what happens if either party breaches the contract.
What are contingencies in a real estate contract?
Contingencies are conditions that must be satisfied for the sale to proceed. Common contingencies include financing (mortgage approval), inspection (property condition), appraisal (property value), and title (clear ownership). If a contingency is not met, the buyer can typically exit the contract without losing their deposit.
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