A real estate purchase agreement is a contract for the purchase or sale of property. The purchase agreement may involve multiple parties, including the buyer, the seller, loan agents, and any other party to the sale. The contract governs the terms of the sale, and outlines the various duties, rights, and responsibilities of each party to the transaction.
The laws governing real estate purchase agreements may vary by state. However, in most cases, real estate purchase agreements include certain components. Some basic terms that are included in the majority of real estate purchase agreements include:
- A legal description of the property, which may include zoning provisions;
- The terms of the sale, which includes purchase price and payment options;
- The terms related to the mortgage, escrow, or other real estate matters related to the sale;
- The closing date;
- Exchange of the deed;
- Any items to be included in the sale of the home, such as fixtures or appliances;
- Any warranties and warranty information;
- The results of any inspections or appraisals that have been performed in connection with the sale; and
- Any legal issues regarding the title, which may include encumbrances, repairs, easements, etc.
By familiarizing themselves with these basic provisions, a purchaser may avoid ambiguities, fraudulent information, or errors in the real estate purchase agreement.
It is important to note that a contract for the sale of property is binding. Real estate sales contracts typically contain certain contingency clauses, or contingencies, which allows one or both parties to terminate the contract. These contingencies will not have any consequences if certain conditions are not met.
What Should I Do Before Entering Into a Real Estate Purchase Agreement?
There are steps an individual can take to attempt to avoid purchase contract disputes. It is important for a potential purchaser to ask any questions they may have for their real estate lawyer. The majority of real estate transactions follow the buyer beware standard, which provides that it is up to the buyer to check for defects or substandard elements of the property.
A potential purchaser can protect themselves by taking additional measures prior to the purchase, including:
- Inspecting the property;
- Hiring an appraiser to verify the value of the home;
- Hiring an inspector to ensure the safety of the home;
- Reviewing the entire contract carefully; and
- Interviewing neighbors to obtain information about the home or the neighborhood.
What is a Real Estate Purchase Contract Dispute?
As noted above, the real estate purchase contract is a signed agreement for the sale or purchase of real property. Disputes arising from real estate purchase contracts typically arise after the contract has been signed by both parties, but before the entire transaction has been completed.
What Are Conditions and Terms of a Real Estate Purchase Contract?
A real estate purchase agreement may contain terms that the parties agree to follow and conditions that the parties agree to meet, including:
- A legal description of the property;
- The purchase price of the property;
- The closing date;
- Any items included in the sale, such as appliances, carpeting, or lighting fixtures;
- Any items not included in the sale;
- Clear title;
- The condition of the property; and
- The type of deed being transferred.
Any party can breach the real estate contract if they fail to follow the terms or conditions of the contract.
What is a Dispute over Closing Costs?
A closing cost dispute is a type of contract dispute that involves the negotiated price of the real estate property. The types of disputes that may arise include:
- Loan fraud;
- Conflicts regarding the good faith estimates;
- Misrepresentation of the contract terms; or
- A dispute over which local laws apply to the purchase contract.
What are Some Other Real Estate Purchase Contract Disputes?
Other real estate purchase contract disputes usually involve failing to complete a contingency that must be met prior to the completion of the sale, which may include:
- Obtaining a specific type of financing;
- Inspecting the property prior to the taking possession;
- The buyer selling another property they own by a certain date;
- Failure to pay on time, for example failing to close escrow in the time specified; or
- Failure to deliver the deed to the property in the correct way.
How Can I Resolve My Real Estate Dispute?
In most cases, the manner in which the parties are required to resolve a dispute arising from the real estate purchase agreement is outlined in the contract. Typically, real estate contract disputes are resolved using one of the following methods:
Arbitration is a process to resolve legal conflicts that is conducted by an individual called an arbitrator. An arbitrator is a neutral third party that hears the parties’ claims and makes a decision on those claims, called an arbitration award. In some cases, the parties can agree to arbitrate and, in some cases, it is mandatory.
Mediation is a process to resolve a legal conflict that is conducted by a neutral third party, called a mediator. Mediation is used to promote settlement or compromise. It can be a very effective tool for resolving civil disputes. It may provide the parties the opportunity to identify issues not originally considered to be part of the dispute.
Small claims courts handle disputes involving a small amount of money. Cases in small claims court usually involve individuals, or an individual against a business. The amount that can be sought in a small claims court varies by jurisdiction but is typically between $1,000 and $5,000.
What are Available Remedies for Breach of Real Estate Purchase Contracts?
If a party fails to comply with the terms and conditions of a real estate purchase agreement, that party is in breach or default of the contract. The majority of purchase contracts include alternative dispute resolution requirements that must be utilized to resolve any disputes that arise from the agreement. If the parties to the agreement did not agree to an alternative resolution clause, the remedy for a breach will depend on whether the non-breaching party is the buyer or the seller.
If the non-breaching party is the purchaser, remedies may include:
- Suing the seller for damages;
- Terminating the contract and requesting a return of any deposit funds plus payment of any reasonable expenses incurred; or
- Specific performance of the agreement, which may include forcing the seller to perform within the terms of the contract or complete the sale.
If the non-breaching party is the seller, they may:
- Retain the good-faith deposit and terminate the contract;
- Sue the purchaser for breach of contract to obtain money damages; or
- File a lawsuit for specific performance, which may include forcing the buyer to perform within the terms of the contract, or complete the purchase.
Do I Need an Attorney for a Dispute Involving a Real Estate Purchase Contract?
Yes, it is essential to have the assistance of an experienced contract attorney for any real estate purchase contract dispute. Real estate purchases are complex and involve multiple parties. It is best to involve an attorney as early in the process as possible in order to avoid disputes arising at a later time.
A lawyer can review any documents prior to you signing them, ensure your rights are protected, and assist you if any issues do arise out of the real estate purchase agreement.