Almost all real estate transactions begin with the signing of a real estate contract. This document is the most important document in the entire transaction. The contract sets forth the rights and obligations of the buyer and the seller. The contract sets forth what I call the essential terms of the contract, as well as the other terms. The essential terms are the identity of the buyer and seller, as well as the purchase price, closing date, the type of deed the seller must provide and what appliances and fixtures are included in the sale. The other terms include the rights of the buyer to perform inspections, the seller’s obligation to make repairs, the quality of title the seller must provide, as well as the many other terms that define how the transaction must proceed.
If is for this reason it is important for each party to have an attorney to review the contract to make sure that the party’s legal rights are protected and to advise them of their duties and obligations. Once the contract is finalized, the buyer and seller are bound by its terms and may later regret if they did not understand all of the terms or if the terms are not what they intended.
The general rule is real estate contracts are to be drafted in plain language. However, there are concepts in real estate transactions which come to us from English common law and practices dating back many centuries. The average lay person may be hard pressed to understand some of those concepts. On the other hand, attorneys are trained in this area and they are better able to advise their clients as to the subtle nuances of real estate law.
It is important that each party have an attorney review the contracts to make sure the legal rights of the party are protected and that the party understands the terms of the contract. Realtors are not legally allowed to give legal advice to the parties and cannot represent the legal rights of the parties. The fact that the Realtor-prepared contract is a “standard” contract is misleading. There is no “standard” contract form and each Realtor may have their own form with terms that differ from other Realtors. For example, some forms of contract allow the buyer to cancel the contract if the buyer is not satisfied with the home inspections, while other forms allow the seller the option to cure the defective items before the buyer may cancel the contract.
The reader is cautioned that not all real estate contracts contain an attorney review clause. It only applies to residential contracts prepared by Realtors. If the contract contains an attorney review clause, it must be stated at the top of the first page of the contract in bold face.
If the contract does not contain an attorney review clause, the buyer and seller should not sign the contract until it is first reviewed by their attorney. Once a contract is signed it is binding upon the party. If the contract does not contain the protection which they want, they will still be bound by what the contract states.
In all cases, a buyer and seller will be best served by retaining an attorney to represent each of their interests in reviewing and signing a real estate contract.