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Sales Contracts

Southern New Hampshire University

Real estate sales contracts are legal binding agreements between the buyer and seller. These contracts generally highlight each individual(s) legal rights, responsibilities, and general provisions pertaining to the parties involved. Sales contracts are considered to cover an offer to purchase, a contract of purchase and sell, a purchase agreement, an earnest money agreement, or a deposit receipt. These documents can differ from one another depending on the state in which the transaction is coordinated, however most states generally follow similar protocols.

The language that is used in these agreements is often straight forward and easy to comprehend. While it may contain many legal and extensive terms and conditions, they are often expressed similar to Laymen’s terms. These contracts are organized formally and generally cover each sub-section and/or element of real estate transactions. There are various sections that make up a sales contract that include, but are not limited to: property description, pricing, method of payments and down payments, eminent domain, title search and supporting documentations, contingencies, prior transfer of warranties (along with dates and signatures of parties involved). Eventually, it is mandatory for these agreements to be reviewed and eventually accepted by all parties involved in order to pursue the transaction of the sale.

Real estate sales contracts are made up of the real estate offering (purchase price). “If the buyer submits an offer to purchase a given home, as long as the offer is not accepted by the seller, the buyer can revoke the offer in writing and be freed from obligation under the purchase agreement. If the home buyer makes an offer and the seller responds with different terms than the offer (called a counter offer), there is no contract because the parties have not agreed to the same terms. Until the parties have agreed upon the same terms of the desired purchase and sale in writing, no legal and binding contract exists.” (Real Estate Law, 2017)

Contingencies are also an important aspect of a sales contract. A contingency is a clause within the contract that allows the parties the right to back out of a contract under certain circumstances that must be negotiated between both the buyer and seller. “Contingencies can include details such as the timeframe (e.g. The buyer has 14 days to inspect the property) and specific terms (e.g. The buyer has 21 days to secure a 30-year conventional loan for 80% of the purchase price at an interest rate no higher than 4.5%). Any contingency clause should be clearly stated so that all parties understand the terms.” (Folger, 2017)

Addendums and amendments are also crucial factors of a sales contract. This section states that both parties can revise or modify sections of the sales contract. In order for an amendment to be valid, all parties must separately sign or initial the amendment prior to the time the official contract is signed. In other words, an addendum “is an agreed-upon addition signed by all parties to the original contract. It details the specific terms, clauses, sections and definitions to be changed in the original contract but otherwise leaves it in full force and effect.” (Hirby, 2016)

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