It Is The Glue That Binds A Contract

Category: Finance, Real Estate.

The real estate contract is the most often used, yet little understood tool in the real estate business.

Real estate contracts are based on common law contract principles, so it is important that you understand the nuts and bolts of contract law. Whether you are a rank beginner or seasoned expert, there is no excuse for not knowing and understanding the real estate contract. Offer, Counteroffer and Acceptance. The contract is generally drafted in the form of an offer. In most states there are standardized contracts used by real estate agents and attorneys. The offer is usually signed by the buyer( the offeror) .

An acceptance is made if the offeree( the seller, in this case) agrees to the exact terms of the offer. The contract is not binding until the seller accepts, creating a meeting of the minds. If the seller replies, I ll accept your offer if you agree to close fifteen days sooner, there is no binding contract, but rather a counteroffer. If the offer is not accepted in the time frame and manner set forth by the buyer( offeror) , then there is no contract. The basic building block of a contract is that there is mutual agreement. For example, if the contract specifies that acceptance must be made by facsimile, an acceptance by telephone call or mail will not suffice. The seller agrees to sell, and the buyer agrees to buy.

A real estate sales contract is a bilateral( two- way) agreement. Compare this with an option. A bilateral agreement with a liquidated damages provision yields the same result if the buyer fails to close escrow. An option is a unilateral( one- way) agreement in that the seller is obligated to sell, but the buyer is not obligated to buy it is his option to do so. The seller keeps the buyer s earnest money and the deal is over. With few exceptions, a contract for purchase and sale of real estate must be in writing to be enforceable. There are some basic requirements that must be present to make a real estate contract valid: As stated earlier, there must be mutual agreement or meeting of the minds.

Thus, if a buyer makes an offer in writing and the seller accepts orally, the buyer is, then backs out out of luck. Although not legally required, a contract commonly sets forth full names and middle initials( it helps the title company in preparation of the title commitment) . The contract must identify the parties. If one of the parties is a corporation, it should so state North American Land Acquisitions, Inc. , a Nevada Corporation. Although not required, the legal description should be st forth. The contract must identify the property.

A vague description such as my lakefront home" may not be specific enough to create a binding contract. A contract must have consideration to be enforceable. The contract must state the purchase price of the property or a reasonably ascertainable figure appraised value as determined by ABC Appraisal Group. Consideration is the benefit, interest or value that induces a promise. The amount of the consideration is not important, but rather whether there is consideration at all. It is the glue that binds a contract.

It is common for a contract to state that ten dollars and other good and valuable consideration has been paid and received. The party signing must be of legal age and sound mind. A contract must be signed to be enforceable. A notary s signature or witness is not required. A facsimile signature is usually acceptable, so long as the contract states that facsimile signatures are valid.

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