If you plan on buying or selling real estate you will most likely be presented with a contract to sign. The contract is the basis for your transaction and contains all the information that is needed for the purchase or sale. The contract is the blueprint for the timeline of activity and spells out the responsibilities and expectations of both parties. Buying and selling property is serious business and most often involves a large financial transaction. Both parties need to know what they are signing before they sign on the dotted line.
The first thing you need to know is that you are signing a contract. It is a legal, binding document and not just a piece of paper. You are agreeing to perform according to the language in the contract and there are legal consequences if you don’t. A contract is a legal promise to perform and you should never sign a contract until you know what you are signing. As Realtors, we use standard contracts that have been approved by our local Association and we fill in the blanks on these pre-printed forms. We are not allowed to interpret the language of the contracts since that would be practicing law. You should always have your attorney review any contract before you sign it or make it contingent on your attorney reviewing it. Any questions or concerns you have can be addressed by your attorney to your satisfaction before you become obligated.
You should also read the contract thoroughly before you sign anything. Our purchase contracts are multi page contracts and there can also be several pages of riders attached. Having to read through 10 or 12 pages is time consuming but well worth the time. There are many important details contained within the document that obligate you both financially and time wise. Purchase price, earnest money amounts, financing & appraisal dates, inspection dates and closing dates are just a few of the terms that are spelled out in the contract. The terms of the contract are negotiated between the buyer and seller and when an agreement has been reached both parties sign the final contract. It is vitally important that you understand exactly what you are agreeing to before you sign and are obligated to perform. The dates that are contained in the contract are not suggested dates, they are deadlines. Things must happen by those dates or you could be in breach of contract. For example, the closing date is the latest day that you can close on the property and that is the date that you must be out of your house completely. Make sure that you can accommodate that date before you sign. There may be several transactions dependent on that closing date happening and you may not be able to change it after you sign. Moving companies may be hired, closing documents drafted and loan papers drawn up and if you are unable to comply with the closing date you are in breach of contract and could potentially be sued.
If you are buying property your contract may contain several contingencies. Inspection, financing and appraisal contingencies are all common in purchase contracts. As a buyer, you must meet these contingencies by the dates set forth in the contract. If you do not, you may risk losing your earnest money deposit. The remedies available to the buyer and seller if either party fails to perform are also contained within the contract. These are also clauses that you should discuss with your attorney to make sure you understand your obligations and your remedies if the other party should default. Ask questions about anything you do not understand before you sign. Being informed before you sign a contract can save you emotional and financial distress later on. Have your attorney review the contract, ask questions and be aware of your obligations. Remember, it’s a lot easier to sign a contract than it is to break one!