Real estate Terms & Conditions are the legally binding clauses in a purchase agreement that define the obligations, rights, and contingencies for buyers and sellers, such as inspection, appraisal, and financing requirements. These key provisions dictate the closing date, final price, and necessary actions, including Covenants, Conditions and Restrictions (CC&Rs), which dictate property use.
Key Contract Conditions (Contingencies)
These are conditions that must be met for a sale to proceed:
- Inspection Contingency: Allows the buyer to inspect the property and negotiate repairs or cancel if issues arise.
- Financing/Loan Contingency: Gives the buyer time to secure mortgage financing. If they cannot get a loan, they can back out without penalty.
- Appraisal Contingency: Ensures the property is appraised at or above the purchase price, protecting the buyer and lender.
- Sale of Current Home Contingency: Makes the purchase dependent on the buyer selling their existing home first.
Common Terms & Definitions
- Earnest Money: A deposit made by the buyer to demonstrate serious intent, often held in escrow.
- Closing of Escrow: The final step in the transaction where ownership formally transfers from seller to buyer.
- Title: The legal documentation proving property ownership.
- Default: When a party fails to meet the obligations set out in the contract.
- Cancellation Clause: Defines how and when parties can legally terminate the agreement.
- CC&Rs (Covenants, Conditions and Restrictions): Rules imposed by homeowners associations (HOAs) regarding property appearance and use.
Common Types of Real Estate Contracts
- Purchase Agreement: The main contract detailing the sale terms.
- Lease Agreement: A contract for renting property.
- Assignment Contract: Used in wholesaling, where a buyer assigns their contractual rights to another buyer.
- Power of Attorney Agreements: Legal documents allowing someone to act on another’s behalf in a transaction.
