By law, real estate purchase contracts must be in writing. Oral realty contracts are unenforceable in court. Written agreements prevent misunderstandings which could otherwise occur with oral or "handshake" sales contracts.
There is no such thing as a "standard" real estate purchase contract; each one is unique. A few states have required forms or terms which must be included in residential sales contracts, but that doesn't stop home buyers and sellers from including essential terms they want.
Study the purchase contract form you will be asked to sign. When you find something in the form you don't understand, discuss that item with your realty agent and/or with your attorney. Equally important, check the form to be sure it includes the essentials. A few tips:
- Consider who wrote the form
Many of the forms prepared by the National Association of Realtors have hidden clauses which are anti-seller, anti-buyer or both. They are written with the primary goal of getting the sale closed.
- Don't be afraid to cross out the printing you don't like
Just because something is printed on a purchase contract doesn't mean you must accept it. Either cross it out or modify and initial the change to meet your wishes. Don't hesitate to take the form to your attorney -- preferably an experienced real estate attorney -- for advice.
- A confused mind says "no"
Buying a home is confusing enough, but reading and understanding the purchase contract plus other required paperwork can be overwhelming. That's why many home buyers (and sellers) say "I want to think it over." They are really saying they are either overwhelmed by the complexity of the forms or they don't understand something and are reluctant to admit it.
- Start with a good printed residential contract
Virtually any printed residential purchase contract can be easily adapted to include all the essentials of a fair agreement for both buyer and seller.
Watch out for forms with the printed name of the realty brokerage in the contract. Read these forms especially carefully because they may be very pro-agent. Some of these contracts obligate the parties to use brokerage-affiliated services such as for mortgages, homeowners insurance, termite and/or professional inspections, legal, title insurance and escrow services. Look for hidden fees in these brokerage-prepared agreements, such as a fee to the broker for "document preparation" in addition to the sales commission!
• Essential terms in a real estate contract
Potential Counter-offer Clauses
If your purchase offer is not accepted by the home seller, you should anticipate some counteroffer clauses from the seller:
- Contingency release clause
If you have not specified a deadline for your contingencies, such as 5 or 10 days for a professional inspection, or 30 days for mortgage approval, you can expect a well-advised home seller to set a time limit on your contingencies. Or, if you make your home purchase contract contingent on the sale of your current residence (which few home sellers will accept), expect the seller to counteroffer, giving you 24 or 48 hours after an acceptable second purchase offer is received from a second buyer to remove your contingency clause for sale of your old home. This is reasonable and fair to both buyer and seller.
- An "As Is" clause
Some home sellers insist on selling their homes "as is." That means the seller and realty agent make no representations or warranties and won't pay for any repairs. However, the seller and realty agents must still disclose any known home defects to the buyer. Avoid agreeing to an "as is" clause if you want the seller to pay for repairs of known serious defects.
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