What Is the Real Estate Sales Contract Review Process?
The real estate sales contract review process is the process of going over a real estate contract before signing a purchase agreement. The review checks your contract for clear and accurate information and ensures the proper conditions are included before you sign.
Also called a purchase agreement, the sales contract is the document that officially puts the buyer and seller in business with one another. It says that both parties are agreeing to conduct this transaction where they transfer ownership of the property, but it’s not as simple as agreeing to a sale.
Each party must also agree to certain conditions that work out how the property is transferred, when certain actions must take place, costs, and the rights and responsibilities of each party. The purchase and sales agreement is the most important step in a real estate transaction because it is legally binding upon both parties and cannot be modified without written approval from each person. Reach out to a real estate lawyer.
What Is a Real Estate Sales Contract Review?
A real estate sales contract review is the process of carefully inspecting a purchase agreement before signing to ensure it includes clear wording, accurate information, and conditions that each party is comfortable with. It allows you to understand what the real estate transaction involves.
During the review process, the terms can be modified or removed in order to arrive at a satisfactory agreement. The final version will be signed by both buyer and seller and is legally binding.
Why Have a Real Estate Sales Contract Review?
The law assumes that when you sign a contract you have read and understood its terms. It’s in your best interest to make sure that is true because once signed, the agreement is binding whether you understood it or not. Aside from that, having a real estate transaction lawyer review your contract helps minimize the risks involved in purchasing a property (or selling one), such as financial liability.
It can also increase the chances of a smooth transfer of ownership, making the experience less stressful and more satisfactory to all parties involved. Without a real estate sales contract review, you could end up agreeing to obligations you cannot fulfill, locked into terms you are unhappy with, and fighting legal battles you never anticipated. The end result is wasted time, energy, and money trying to resolve issues that could have been avoided in the first place.
What Does the Real Estate Contract Review Process Include?
The sales contract review generally includes multiple areas of focus. The real estate attorney handling your transaction can carefully read the contract to look for:
Important Clauses and Key Terminology
Each section of the contract should be fine-tooth-combed for important details on who does what, how, and when. Your attorney should inspect line by line, but key areas include sections discussing home price and other costs like deposits and title insurance, deadlines, property address and description, and contingencies for terminating the contract. The attorney should also clarify key terms for you.
Ambiguous or Confusing Language
The home-buying lawyer you work with should also inspect the contract for unclear and confusing language. Sometimes these contracts are drafted from standard templates using archaic legalese that is convoluted and difficult to understand. It’s not necessary for your purchase agreement to adhere to outdated standards like this.
Your lawyer can simplify the language and communicate it in a way that is easy to digest and comprehend, ensuring you know exactly what you are signing up for. They’ll also search for terminology and phrases that could be left to various interpretations. Each party could interpret this ambiguous language in different ways. As a result, you may end up with conflicts that you could have prevented.
Blank Spaces
What’s left out of the contract is just as crucial as what’s put into it. When contracts are not drafted in full but created from boilerplates, there are usually blank spaces that need to be filled in with the appropriate information. Sometimes, the parties may unintentionally skip over these spaces, intend to fill them out but forget to come back to them, or assume they filled them in while only mentally filling in the blanks. In any case, these blank spaces sometimes lead to negative consequences.
If the deadlines aren’t filled in, for instance, a seller could end up waiting indefinitely for a buyer to secure a mortgage loan, effectively costing the property owner money while the home sits on the market with no other potential buyer. An attorney can make sure blank spaces are properly filled in or removed from the contract.
Breach of Contract
Most buyers and sellers are intending to follow through with their deals, but things don’t always go as planned. At any point, either party may default on their end of the bargain, resulting in a breach of contract. The sales agreement needs to be carefully reviewed so you know the ramifications of not delivering what you promised. Conversely, you’ll need to know what rights and remedies you have available if you are not the breaching party.
Key Dates and Deadlines
Reviewing the sales contract includes verifying important dates and deadlines that each party must abide by. If certain time frames are unrealistic for you, your attorney can negotiate a different deadline that is suitable.
Additionally, if they conflict with other events you have pending, your real estate lawyer can suggest an alternative that may work for both parties. Being aware of the deadlines and dates of your real estate transaction also allows you to adequately prepare. Your lawyer can help you keep track and meet deadlines accordingly.
Who Conducts a Real Estate Sales Contract Review?
The real estate transaction process may have multiple parties involved. Sometimes real estate brokers will draft or supply the actual purchase and sale contract or template but will not perform the contract review. The buyer and seller may each have an attorney conduct a contract review on their behalf. The attorneys for both parties will communicate, coordinate, and negotiate any changes their clients desire.
Items To Consider When Reviewing a Real Estate Purchase Agreement
As you and your attorney review your real estate purchase agreement, you will want to pay attention to items like:
- Property identification: The contract should include the exact address of the property, a legal description of it, and any additional buildings included in the sale.
- Appliances and fixtures: Aside from the physical home, what internal items does the sale include? Does it include the fixtures and appliances? Are any items excluded?
- Payments: The contract should clearly state the cost of buying the home, the amount of any required deposit, and the due date for these payments. What specific procedure will you use to exchange the funds? How long does the buyer have to remit payment? Will you use a payment plan? Under what circumstances could you as a buyer lose your deposit?
- Taking possession of the property: Your contract of sale needs to address when the buyer can take control of the property. Will this be at closing or some later date due to extenuating circumstances?
- Title: Typically, the seller must provide the property with a clean title, ensuring no other person or entity has a claim to it that creates a conflict for the new owner. However, you may not require this. Your contract should address whether the seller is required to provide a marketable title and what remedies there are in case the title is not as stipulated.
- Deed: What type of deed will the seller transfer? There are multiple types, each with its own benefits and drawbacks. A warranty deed is the most common, providing the most security for the buyer as it guarantees a clear title. However, some parties agree to a quitclaim deed, which is a much faster process but includes no protection for the buyer. It merely transfers the seller’s interest in the property, so if someone else co-owns it or the seller actually doesn’t own it as he or she asserts, the buyer loses, and the law will not hold the seller accountable.
- Closing costs: Your purchase agreement should include who will pay the closing costs of your transaction. This is often the seller. Closing costs include title insurance. The person who pays closing costs usually selects the title company as well.
- Rights to inspection: To protect the buyer, the contract of sale must address the right to perform a property inspection. You’ll want to have a certified inspector check the property for any issues that could pose a problem. By law, a seller is required to disclose any defects in the property, but there is no guarantee that they will catch or disclose everything.
- Repair costs: If the property requires repairs, it’s important that the contract specify who is responsible for getting them done and paying for them. Sometimes the seller will pay, but the buyer must coordinate the repairs. Other times, the seller will make sure the repairs are handled. There are even situations when the seller will deduct from the cost of the property if the buyer agrees to make the repairs themself.
- Deadlines: The purchase agreement should include deadlines for things like accepting the contract, performing inspections and repairs, getting a mortgage approved, and making payments.
- Contingencies: Having contingency plans built into the real estate contract is a wise decision. If the sale is dependent on particular events taking place, the contract should address this. The buyer or seller should have the right to cancel the contract under certain circumstances. You may have contingencies for mortgage approval, buyer selling their current home, failed or unsatisfactory inspections, and defects in the title.
You Can Have an Experienced Real Estate Lawyer Review Your Contract of Sale
To ensure your real estate contract of sale is properly drafted with mutually beneficial terms, consider hiring a real estate lawyer. Buying or selling a property requires copious amounts of time, money, and knowledge. It is not a good idea to navigate the process alone or with only the help of a real estate agent.
Some real estate lawyers are uniquely qualified to guide you through the entire home-buying process from sourcing properties to obtaining a mortgage loan, preparing documents, reviewing sales contracts, and closing on the property. Even if you’re not interested in using an attorney throughout the real estate transaction, you could at the very least have one review your contract of sale.
Having someone who is intimately familiar with the real estate laws of your state and experienced in handling numerous property transactions oversee your buying or selling experience is invaluable. Not only can a lawyer provide legal advice, but they can also negotiate in your best interest, communicate on your behalf, and keep your sale moving forward.
Who Should Hire a Real Estate Lawyer to Review a Sales Contract?
No matter who you are, your level of experience, or your reasons for buying or selling property, you should have a real estate lawyer review your sales contract. Whether you’re buying your first home, purchasing your next investment property, or opening up a small business, you may want a professional to review your contract.
You should consider hiring a lawyer if you are:
- Buying or selling a home
- Buying or selling land
- Buying or selling a commercial property
- Buying or selling a single-family or multi-family investment property
- Wholesaling a property
- A novice or seasoned investor
Be Sure to Review Your Sales Contract Before Signing
It doesn’t matter how comfortable you are with the person on the other end of the transaction, how much you trust the team that’s helping you do the deal, or how many deals you’ve done in the past. Each situation is unique, which means your sales contract will be as well. Get a qualified legal professional to examine your purchase agreement, protecting your rights and interests throughout the real estate transaction. Reach out to a Vero Beach document prep lawyer.