Learning Center Article
Article: Core Requirements of a Real Estate Contract
Real estate contracts fall under the umbrella of contract law. A contract is a legally enforceable and binding agreement between two or more parties. In most states there are standardized contracts used by real estate brokers that are drafted in the form of an offer. The offer is usually signed by the buyer, but the contract is not binding until the seller accepts, signs and creates a meeting of the minds, (offer and acceptance). There are basic core requirements that must be included to make a real estate contract valid:
Core Requirements of a Real Estate Contract
Consideration
A contract must have consideration to be enforceable. The contract must state the purchase price or how it will be obtained (for example, as determined by forthcoming appraisal). The amount of the consideration is not important, just as long the contract has some type of award, even as nominal as one dollar.
Signatures by Competent Parties
A contract for the sale of real estate must be in writing to be enforceable. Any oral agreements are not enforceable. All parties must have competency, of legal age, not under undue force or intoxication, etc.
Legal Purpose
If the purpose, content, or consideration is illegal, law may deem it unenforceable. For example, a company president signing a contract that involves their company must have the company's official and legal authorization to enter into and sign the contract.
Offer & Acceptance
A real estate sales contract is typically drafted in the form of an offer. The offer is usually signed by the buyer, but the contract is not binding until the seller accepts, signs and creates a meeting of the minds, (offer and acceptance).
Contract Termination
If an offer is made and yet to be accepted, the offer can terminate under the following circumstances:
♦ Death or incapacity of either the buyer or seller
♦ Destruction of the property
♦ Contract expiration
♦ Offer rejection by the buyer
♦ Withdrawal of the offer, before formal acceptance
♦ Any counteroffers terminates the original offer
