Before You Sign: How to Review a Real Estate Contract

Written by Posted On Monday, 31 August 2015 08:44

Whether you’re buying your first home or a storefront for your business, you must agree to the terms of a real estate contract. You can’t skim these contracts like you might skin a terms and conditions agreement--a real estate contract dictates the terms of a large life investment. In this article, we walk you through the components of a real estate contract so you can better understand what you’re reviewing before you sign the agreement.

Parties

Every real estate contract must list the parties in the transaction. Generally speaking, this includes you (the buyer) and the person you’re buying from (the seller). These parties are known as the principles to distinguish them from any other specified parties.Occasionally, the contract also includes the full name of a real estate agent who brokers the sale and earns a commission on it.

All parties listed must be legally considered competent (i.e. under no impairment that would affect their judgment) and each party must sign the contact. Contacts must reflect what’s known as a meeting of the minds. In other words, the responsibilities of each party must be fully outlined and agreed to within the body of the contract.

Property

Your real estate contract must include the property’s address. However, it may also contain a legal description of the property. This legal description can include condition of any structures on the land, especially if you’re buying a fixer upper. The contract may include contingencies to protect you and the seller. Common contingencies are mortgage terms, inspection requirements, and appraisal conditions.

Purchase Price

The contract must record the property’s sales price. If the price isn’t set at the time of the signing, usually because the price depends on a future appraisal, the purchase price may be approximate.The contact also includes what’s known as consideration. Consideration includes any currency, goods, or services intended to pay for the property. In most cases, money is the sole form of consideration.

If you don’t have legal experience in the real estate field, contact an experienced attorney after you look over the contract but before you sign it. Have the attorney review the contract in detail. An expert from Silver Law Group says real estate law is extremely complex, so it's important to go to an experienced real estate attorney with any questions you have about your transaction (learn more at http://silverlawgroup.com/). Your attorney will check for any liens or warrants on the property, prorate any taxes, and check the contract terms against state, municipal, and homeowner’s association bylaws.

Too many home buyers have been blindsided by inadequate review of their real estate contract. A thorough review ensures that you can move into your new property with full peace of mind.

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