Contracts are used to close different kinds of real estate transactions and each agreement will vary accordingly. There are a few essential components to all real estate contracts that you might want to become familiar with. If you understand the materials needed, you can then help ensure each agreement you enter is understood and well-articulated. The following outlines items to include in various real estate agreements and contracts.
Every real estate contract should comprise a contingency that allows buyers to walk away if the property inspection does not go as you planned. Contracts should specify which issues the sellers are responsible for repairing before closing so this will clarify expectations for both parties while protecting buyers from being forced into a transaction they did not sign up for.
Furthermore, it’s important to include a contingency that allows buyers to back out of the real estate transaction should financing fall through. Also, in some cases, it might be a good idea to add a clause to protect the buyer in the event their previous home does not sell.
Always make sure to specify who is responsible for closing costs and keep an eye out for this information. Often times sellers will be in charge of covering these costs but it could be buried somewhere within the contract. Be sure closing cost information is clear in any real estate contract to avoid confusion.
Some sellers will include a home warranty when advertising a property that is meant to cover certain repair costs although it depends on the sellers. If there is a warranty for the property it should be listed in the contract so both parties understand who is responsible and for what.
It is routine for real estate contracts to state what happens if one or more parties default. This not only establishes clear expectations for the buyers and sellers but it also helps to avoid court proceedings if someone fails to live up to their end of the deal. By including the consequences of default, there will be no “what if” questions at the time of the agreement.