The Standard Agreement for the Sale of Real Estate Explained

A Brief Explanation of a Standard Real Estate Sale Agreement

A Standard Real Estate Sale Agreement is a legally binding document that outlines the obligations and responsibilities of a seller and buyer during the course of a real estate transaction. From a bird’s eye view, the purpose of the standard agreement is to serve as a formal declaration for a property buyer to submit an offer for a specific property. In order for a property transaction to be legally binding, both the buyer and seller must agree to the terms and conditions outlined in the agreement. It should be noted that a standard agreement is often used as a basis for purchasing a condo or home.
The agreement for the sale of real estate is not only important for establishing the terms but is also helpful for coming to a fair and amicable resolution if either party encounters issues. Further , if the agreement is not fulfilled by a certain date or if either party does not meet their obligations outlined in the agreement, this may result in some sort of penalty. Similarly, if a party damages the property before it changes hands, the other party may demand financial compensation. For the most part, the agreement is efficient way of promoting and maintaining a respectful and professional relationship between a buyer and a seller.

Elements of a Real Estate Sale Agreement

One of the keys to executing a successful real estate transaction is a written agreement. While Florida law does not require a real estate contract to be in writing to be enforceable, a well-written and comprehensive contract is the best way for a buyer and a seller to agree on the terms of an agreement.
The following describes key components of a standard agreement to purchase real estate in Florida. Property Description: In order to buy or sell a home in Florida, the agreement should describe the real property to be transferred. The property must be adequately identified so that it can be located and distinguished from other properties. In many cases the legal description ("lot number") is used to identify the property. However, Property Appraiser website (found at www.ccpao.org) also has a "property address" section, which may be listed, in addition to the legal description.
Purchase Price: Under Florida law, the consideration exchanged between the parties must be stated. The consideration is usually expressed as one or more of the following: 1. Tree removal and other services, 2. Credits at closing or in the purchase price, 3. Cash, 4. Financed loan amount, 5. assumption of an existing mortgage.
Closing Date: The Contract should list a date by which the sale will be completed. Often, this is listed as "on or about" a certain date. Many standard contracts use the date the seller acquires possession of the property as the "closing date". If you are selling a home you no longer live in, this may be when you receive your check.
Contingencies: A standard agreement for purchase and sale often includes contingencies. A contingency is a condition or event that must occur before the contract is binding. An example of a contingency is a statement that the sale is contingent on an inspection.

How Do Contingencies Work in a Real Estate Sale Agreement?

The first part of the standard agreement for the sale of real estate contains a number of contingencies that protect both the purchaser and the vendor. The purchaser has contingencies relating to financing, home inspection and appraisal.
Mortgage Financing
In the current real estate environment, mortgage financing is generally not a problem. However it used to be that you could have a situation where a buyer would agree to purchase a property for a certain price, two weeks later after their mortgage had been approved, the prime rate would go up 1% or so. In those days it was not uncommon for purchasers to ask the vendor to reduce the price or credit them a sum of money because they were unable to obtain a mortgage at the same rate provided that the property value had not decreased between signing and closing.
Home Inspection
The purchaser of a home has, as mentioned above, the right to have the home inspected by a certified home inspector within the agreed upon time. This gives the purchaser the opportunity to unilaterally terminate the agreement if there are problems with the condition of the property. Of course this means that if any significant defects are noted by the home inspector, the deal will probably not go ahead. On a parallel path, the purchaser has the right to have the property appraised to ensure that the agreed upon price is consistent with a fair market value. The home inspection and appraisal both need to be satisfactory to the purchaser.
Disclosure
If the vendor is aware of any defects with the property, it is a good idea (and the law in Ontario) for the vendor to disclose the defects to the purchaser upfront as opposed to the vendor sitting back and waiting for the purchaser to discover the problem. The more information that is disclosed prior to an agreement being entered into, the less likely there will be a dispute later.

How to Write a Real Estate Sale Agreement

Whether you are buying a property from a third party or selling a property to a third party, you will more often than not, need a real estate sale agreement. By definition, this is a contract that guides the terms under which the transaction is carried out; its objective is to assign the ownership of the property in exchange of a price. A real estate sale agreement is a legally binding document and thus it needs to be drafted with precision and accuracy, and may require the assistance of a specialist in your state or territory. The general process of drafting a real estate sale agreement follows the below steps:
Once the above basic components are captured in the real estate sale agreement, you would normally start contemplating on other specific clauses required for your particular transaction. For instance, you may need clauses welcoming a property inspection, clause or clauses related to the financing of the property, or releasing the earnest deposit. You need the eyes of a trained specialist to provide the best possible protection to you in those situations. If you are not using a real estate agent and specifically managing the process, it is extremely important to have a lawyer who specializes in real estate representation involved in the drafting of your transaction and its follow-up. There are several dangers, both for the buyer and seller, and it is important to avoid any mistakes or omissions at this critical juncture, as these could result in significant disputes arising afterwards, thereby increasing your costs.

Pitfalls to Avoid in Real Estate Sale Agreements

There are several common mistakes that I see in these agreements regardless of the quality of the drafting. In my experience, it is critical to have a real estate lawyer review all such agreements before they are executed. The following is a list of some of those mistakes:

• Missing deposits – this refers to instances where there is a significant time lapse between the dates of signing the offer, acceptance of the offer, and the deposit date. I have encountered situations where the deposit of money is not made for several weeks after the signing of the offer and acceptance of the offer. One should never think that a seller or his lawyer is holding that money in trust. If the deal goes sideways, you may be out of luck and the deposit money may be gone. Another issue frequently encountered with respect to deposit money is when it is not deposited in a timely fashion. It is not unusual for sellers to demand proof of deposit of the deposit money from the buyer’s lawyer and will often not provide an executed agreement unless that is done proving serious bad faith by the seller. In such circumstances, your lawyer will have to try to renegotiate the terms of the agreement if you can secure that additional time with the seller as they may have other offers at that time. Many times that additional time is refused and paralysis results. I have seen parties go through the transaction process and not find out until the end that the agreement does not have the signature of the husband or wife of one of the vendor’s. This results in automatic nullification of the sale by virtue of the absence of a signature of both spouses.
• Conditional Sales Agreement – make sure you have a conditional sales agreement and make sure the conditions have been satisfied or waived before it is submitted to a court for approval. Conditional sales agreements are put in place frequently to convince professionals such as financial institutions that there is a binding sale . Very often the property is never registered. I have seen this happen with the result that the purchaser is distraught over the lost opportunity to acquire the property and the owners have never been able to recover or utilize the positive benefits of the transaction.
• Conditions precedent for due diligence clearly set forth in the Agreement. Some agreements contain a reference stating that the buyer can do all due diligence by a given date but fail to include what those actual due diligence conditions are and what a buyer needs to do to satisfy those conditions. In this case, a buyer could do things such as inspecting the building to discover fatal flaws that might impact the purchase price and an ability to apply an off setting amount to the purchase price would not be possible.
• A failure to close will permit the seller to proceed against the service provider, the licensed real estate broker or agent for the commission on the basis that a ready willing and able buyer was found. Similarly, the seller can also sue the purchaser for specific performance or the contractual damages as outlined within the agreement. Many agreements contain a waiver of the right to specific performance and result in contractual damages only. There is an enormous cost to the purchaser of doing this once costs are awarded by the judge, lawyers fees and other payments to be made so this is a very serious issue.
• In some circumstances, an agreement is not properly discharged through the registry office resulting in a cloud on the title and in some cases, a requirement that a purchaser re-register the ongoing sale transaction to properly rectify the problem. This is a very costly mistake, particularly if the agreement contained a waiver of the right to specific performance. In such cases, the seller is probably off the hook and will be able to keep the damages and a litigation gap of a year or more has resulted.

The Closing Process of Real Estate Sales

The sale process is ready to culminate. At last, after a long and arduous process of analyzing the terms and arriving at an agreement that is acceptable for all parties involved, everyone is prepared to go forward. The documents are signed, and funds are available.
Now what? There are several steps that lead up to finalizing the sale, which is colloquial for when the deed of the property is delivered to the buyer and the buyer obtains ownership of the property. The term "closing" refers to the whole process by which the sale of the house is finalized and the property is transferred to the buyer.
Typically, the seller will have provided the buyer with a title insurance policy. Title insurance is a policy the seller provides to the buyer that protects the buyer from any future claims that may be made against the property. Once title insurance is issued and the deed is delivered to the buyer, the seller has met the requirements in the sales contract and the buyer’s obligation to pay the purchase price is triggered. In most cases, a title insurance company assists all parties in closing the sale of the property. At closing, when the funds are available or in escrow, the seller needs to be available to sign all of the necessary paperwork necessary for the closing of the property. If this is not possible, a representative of the seller will need to be present to sign the documentation. The closing agent then provides the necessary paperwork to the appropriate parties and delivers the deed to the buyer. At that point, the buyer pays the purchase price. The closing agent transfers payment to the seller based on the terms of the contract, and the sale is complete once the deed is delivered to the buyer.

A Real Estate Attorney is Essential

Unless you are particularly well versed in real estate law it is necessary for you to have the advice and assistance of a real estate attorney in crafting the Standard Agreement for the Sale of Real Estate. This document is rather complex with many important legal provisions that need to be properly handled as they both protect the buyer and seller of the property. When there are specific facts concerning a property that need to be mentioned during the sale, this is especially true. Additionally, there are multiple steps that have to be taken before and following the signing of the Agreement, including financing, inspections, appraisal and a settlement statement, which sometimes include issues like seller assistance . An attorney can properly draft and prepare any additional documents that need to be signed in conjunction with any and all of the aforementioned, as well as making sure any and all requisite addenda are duly executed, delivered and/or recorded.
In the most comprehensive sense, you would want a real estate attorney involved in drafting and reviewing a Standard Agreement for the Sale of Real Estate document, which is a complex instrument involving these numerous aspects of a real estate sale or purchase, from the start until the closing of your real estate transaction.