Questions on Real Estate Contracts

Many people involved in a property transaction have plenty of questions on real estate contracts. Here are answers to common questions that arise.

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Questions on Real Estate Contracts

A contract is simply an agreement between two or more parties to do something. In the case of real estate contract, the agreement is typically the exchange of money for the transfer of the title of the property, to wit, payment for the property. The action being taken by each party is called "consideration." In exchange for you transferring me the property, my consideration is to transfer you a boatload of money.

The first area where people often have questions on real estate contracts is the offer and acceptance process. An offer is not a contract. It becomes a contract, however, if it is accepted. Once this occurs, the agreement is binding and reduced to a more lengthy contract covering the various agreed upon points between the parties. Offers, counter-offers, acceptances and the final real estate contract should always be in writing. If any part is oral, the agreement may be terminated or found invalid by a court.

When an offer is made, it is a rare day that it is immediately accepted. Instead, a seller will typically counter-offer. In such a situation, the original offer is considered void and the buyer now has to decide if he or she will accept the counter-offer. This process continues until a deal is reached or it is determined that an agreement will not occur. To keep things from dragging out, most offers and counter-offers have a "good till" date and time on them. The time span is usually a day or two. If they relevant party does not accept by that time, the offer or counter-offer is considered canceled and any later acceptance will not be binding.

Another area where questions on real estate contracts arise is a violation of a contract. When one party does not live up to the terms of a contract, it is called a breach of contract. Not all breaches are the same. The law recognizes that small variations to an agreement will occur and accepts them as part of doing business. Larger breaches, however, are known as "material breaches" and mean the aggrieved party can sue. In such situations, the aggrieved party can usually sue for specific performance, which is another way of saying the breaching party should live up to the terms of the contract.

So, what is a material breach? It depends. Real estate law is generally a state matter. Every state has different laws and rules on what is and what is not a material breach in a real estate contract. Generally, a major breach will be the seller refusing to transfer the property despite the buyer meeting the terms of the agreement. If you suspect a material breach is occurring, it is time to sit down with a real estate attorney. It shows the other party that you are serious and an attorney will be knowledgeable on how to proceed.

Obviously, there are a wide variety of questions on real estate contracts that can arise. The issues discussed above cover the most frequent ones. If you find yourself in a difficult situation, it is highly advisable to sit down with an attorney. Real estate transactions involve hundreds of thousands of dollars, so the expense is well worth it.

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