5 Essential Clauses that You Need to Have in Your Real Estate Contract!

Real estate is a complex business, there are numerous activities that you need to carry out before you move to your new property. From searching for a perfect real-estate broker to getting the appropriate financing and making your final offer, you are finally at the contract stage, which is complex and time-consuming.

But when you are wrapping up the real estate deal, you will end up reading and filing a lot of legal documents defining various terms and conditions on your offer. Apart from this, you need to be aware of many legal clauses included in the real estate purchase contract.

Therefore, in this post, we will discuss all the five necessary clauses that you must have in your contract to avoid getting into any financial or legal hurdles.

What is Real Estate Contract?

A real estate contract is a legally indissoluble document between two parties in which they are purchasing, selling, or exchanging real estate property. It defines the expectations of buyers and that of sellers. All terms and conditions mentioned in the agreement are enforceable. A real estate contract generally covers terms such as finance, property detail, examinations, appliances installed, sale of real estate, etc.

How Real Estate Contracts Work?

Real estate contract works in three main steps:

1. An official document is created by the property buyer agent and is provided to the seller. This initial offer contains a description of the particular property, parties involved, selling price, token money, and finishing date.

2. Upon receiving this offer, the seller rejects, accepts, or can give a counteroffer. offer could include increased price, modification in terms, closing cost or contingency, etc.

3. Once both parties involved accept terms, they sign contracts, and it becomes a legally binding contract.

Who Creates Real Estate Contract?

Generally, a real estate agreement or contract is created by the buyer’s attorney, who has proper licensing to practice law. However, if a buyer is unable to find an appropriate attorney, then they can hire a legal outsourcing firm for real estate contract drafting. These companies have complete knowledge of laws and regulations for lease agreements in your state.

Essential Clauses in Real Estate Contracts

Here are five essential clauses that should be included in a real estate contract:

1. Legal Description — This defines the location of the property through a complete description of the metes and bounds of said property. It is crucial since it makes two parties aware of property being transferred at any given time.

2. Sale Price and Terms — This outlines the total price of a property, the amount of money to be paid down, terms and dates when payments have to be made, and if a buyer needs a mortgage, this includes an amount of mortgage, interest rate and terms of repayment. This discloses the price at which a firm sells goods and services and the payment method.

3. Inspections Clause — This entails that the buyer is given a particular period within which to conduct his/her inspections, and depending on the outcome, they may negotiate for repairs or even cancel the contract.

4. Closing and Possession Date — This determines the time of signing of legal documents indicating the transfer of property possession. It also defines periods that buyers can physically take possession of the property.

5. Contingencies and closing process — A closing contingency is a condition or activity that must be completed for a real estate transaction. Some of the typical contingencies that are associated with real estate include a buyer getting financing, a satisfactory home inspection, and the sale of a buyer’s current home, among others.

Wrapping Up

The contracts for new property should be clear, accurate, and factual. You must get familiar with key aspects of the contract to ensure that any mistakes can be quickly corrected.

The conditions of a real estate agreement are tricky to understand, but it is important for both seller and buyer that every condition is agreed upon before signing a contract.

Taking time to reevaluate and examine all terms in your real estate property agreement can save you from possible headaches throughout the process. It is always a good idea to have an experienced law attorney by your side to help you review the real estate contract thoroughly before finalizing a deal.