Contract for the Sale of a House: What are the Essentials?
A contract for the sale of a house is usually several pages long, so it can appear to be quite intimidating. However, when you strip away all the legal definitions and the clauses that can sometimes be a bit repetitive, there are a few basics that are surprisingly easy to understand. The same form is usually used for both the sale and purchase of the property in question, because these are two sides of the same transaction. The form is transferred between the agents representing both the sellers and the buyers, and when signatures and initials are attached it then becomes an official contract.
The Details of the Contract
Every contract for sale must have some basic defining information. The name of the seller, the legal address and description of the property, and of course the price at which the house will be put up for sale, otherwise known as the asking price are some common items. The names of the buyers are also included when there is an offer, together with the offer bid, or the price that the buyers are prepared to pay.
Contingencies
This section is extremely important and both buyers and sellers must pay close attention to what is listed here. The contingencies take care of all the “what if” questions. For instance, “what if the buyer fails to come up with financing by the agreed date?” can be written in as a contingency. Other popular contingencies deal with closing dates, agreements to fix things or not to fix things, money to be applied towards closing costs or an appliance allowance, the right to an inspection, or what happens in the event the appraisal comes back with a low value, the possession date, and the items that are included and not included in the sale, are all listed in this section.
Escrow Agreement
There may be a section of the sale contract that stipulates what happens to a buyer’s earnest money. To ensure that a buyer is serious about entering into the contract, the seller can demand a sum of earnest money made out to their name, but the funds are usually held in escrow or by a third party, which is stipulated in the agreement, and then handed over to the seller upon completion of the sale.
Room for Counteroffers
A counteroffer occurs when either the seller or the buyer does not accept a proposed price or contingency, and they send a response to the other party telling them what they offer instead. There may be several counteroffers on the same contract, and if there are multiple bidders or buyers trying to get the same property, the situation can be more intense. Counteroffers are written directly into the main contract and initialled by the proposing party before they are taken back to the negotiation table.
A sample “Contract for Sale of a House” document is provided here and can be downloaded free of charge.
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