4-3 Short Paper: Sales Contracts
Southern New Hampshire University
OL-301-Q2290 Real Estate
Sales contracts are important agreements that describe information between a buyer and a seller for a prescribed piece of real estate. The contracts outline the legal entitlements and responsibilities of both the buyer and seller. A sales contract may also be referred to as an offer to purchase, a contract of purchase and sale, an earnest agreement, receipt of deposit, or purchase agreement (Galaty, Allaway, & Kyle, 2018). Between the parties they must both have the lawful capability to conduct the acquisition, exchange, or other transmission of the real property at hand. The legal “consideration” is what the contract is based around, to where the “consideration” is the described payment for which will be exchanged for the real estate. In most cases it will be a predetermined amount on money. Additionally, “consideration” could also be in the form of property or a given promise to pay in the future (Weintraub, 2019).
There are many essential elements of the contract that further describe key information for the purchase of real estate. These important provisions make up the majority of the sales contract to which will be followed by the seller and buyer. Examples of these provisions include, sales price and terms, a narrative of the property and all improvements and statements regarding the condition of the title, to include the form of deed that will be delivered from the seller. In addition, what title evidence that is required for the sale, to whom will provide it, and how defects within the title will be removed. Lastly, statements of all terms, contingencies and conditions that will be met for a successful transfer between the parties will also be included (Galaty, Allaway, & Kyle, 2018).
Within the contract are delivery instructions, which are an additional key component to the agreement. The information provided clarifies how the real estate will trade once the sale has been finalized. There are expectations of the property, through the sales contract, that describe the condition the property sits and explains deficiencies to which the buyers are aware of. To find a property in a less attractive condition than what was described prior to the delivery would cause undue harm onto the buyer. To mitigate incidents such as that, proper inspections of the property is important, as they paint a current picture of the property’s condition. This will give the buyer piece of mind and will ensure that the real estate is reliable and of solid structure. Without an inspection, elements that are hidden or not easily accessible can create additional hardships after delivery and can have financial burdens on the buyer.
Amendment and Addendums also make up an important segment of the sales contract. Changes and modifications that occur to the existing subject matter within the contract are considered amendments. Amendments can also make up changes to statements or provisions that may have been established in a pre-printed contract. Prior to signing the sales contract, both parties must initial these amendments as they are legally binding. In the event that provisions must be altered after the sales contract is signed, an additional agreement, that is separate from the original contract, can be executed by the buyer and seller. Provisions that are added to an existing sales contract that alters the content is an addendum. Addendums will include provisions from the contract by reference, as shown in the original agreement, and will be signed by all parties. An example of addendums could be that there are repairs to be made to the property that were discovered during the home inspection and now there will be an agreement to split the cost of the repairs between the parties ( Galaty, Allaway, & Kyle, 2018). Terms that are written in this section is explicit and who takes responsibility for certain actions.
Lastly the title and closing section is another important part to the sales contract as it dictates who will be responsible for what during the closing process. It also dictates the seller’s ability to remove any burdens on the title and ability to deliver the deed. If any encumbrances happen to fall on the title, then the seller must clear them before the sale. This does not include easements or restrictions that would not interfere with the buyers intended use of the property. Title insurance and how it will be purchased is covered in this section as well as settlement costs and transfer charges (realtybid.com, n.d).
The sales contract is a vital document that is legally binding during the buying and selling process. Contracts set forth the ground rules for both parties and ensures a clear and concise road map for what is expected. This documents protects sellers as that of buyers when taking in consideration that this for some people could be the largest purchase they will ever make. When this amount of assets is being transferred from one party to the next, every aspect of the transaction must be covered. This is why real estate sales contracts exist.
Galaty, Filmore. Allaway, Wellington. & Kyle, Robert (2018) Modern Real Estate Practice, 20th Edition. Kaplan Inc.
Realtybid.com (n.d.) Purchase Agreement For Real Estate. Retrieved from, https://www.realtybid.com/subdata/SampleContract.pdf
Weintraub, Elizabeth (2019) The Components of a Real Estate Purchase Contract. Retrieved from, https://www.thebalance.com/purchase-contract-1798612