Real estate contracts are legally binding agreements between real estate buyers and sellers full of details and terms that the average citizen may not understand. As these documents are typically created to protect both buyers and sellers, far too often parties involved have little to no idea what to look for in an offer that can impact their transaction. A party with the knowledge could be taking advantage of the opposing inexperienced party.
It’s important for buyers and sellers to understand all of the clauses in a real estate contract before signing one. What should be thoroughly examined, scrutinized, and reviewed? Hiring an experienced professional to help you understand everything in real estate contracts is a smart idea no matter your role in the transaction.
Earnest Money and Contingencies
A real estate contract calls for buyers to give earnest money to be held in escrow during the transaction. What real estate sellers don’t always realize is that the buyer’s earnest money can be refunded for various contingencies in the contract. If the contract calls for an inspection and the inspection reveals more defects than the buyers are willing to take on, the contract can be canceled and the buyers will get their earnest money back. If the contract calls for an attorney review period and the attorney finds the contract unacceptable, the buyers get their earnest money back. If the buyer’s financing falls through, they will also get their earnest money back. If buyers have a home closing contingency and their home doesn’t close, they can cancel the contract and their earnest money is refunded.
Most contracts have a contingency for buyers to get a home inspection. Real estate sellers need to understand that they are required by law to disclose any known deficiencies and defects in the home. When the buyers have a home inspection and it reveals defects, the buyers can ask for these defects to be repaired, replaced, or ask for monetary credit. If the sellers aren’t willing to comply, there is typically a contingency for the buyers to get out of the contract. Buyers need to understand that it is their responsibility to pay for and hire a competent real estate home inspector. Otherwise, any defects not found in the home inspection will become their responsibility after closing.
Buyers and sellers should consult experienced professionals to explain who pays for what closing costs. Some closing costs are the buyer’s responsibility, while some are paid for by the sellers.
Real Estate Agent Bind
This type of clause can bind an individual to a real estate agent for any sales within a certain period whether they are the specified agent for the sale or not. This should always be looked out for in a real estate contract.
Often times, sellers will offer a home warranty to the real estate buyers in their listing. Buyers need to make sure that this is written in the contract or the sellers aren’t legally obligated to provide it.
Contact a Professional
Not comfortable or experienced in reviewing your real estate contract? We have X years of experience in handling and reviewing Real Estate Contracts for both buyers and sellers. Call us at (865)453 -1091 for a free consultation or send us a quick email if you are debating the purchase or sale of a certain property: [email protected].