Real Estate Contracts Explained: Key Terms & Protections
A real estate contract is the legally binding agreement that defines the terms of buying or selling a property. Whether you’re a FSBO seller or buyer, understanding how these contracts work helps you protect your rights and close with confidence.
📘 What Is a Real Estate Contract?
A real estate contract sets the terms between a buyer and seller, covering the price, property details, financing terms, contingencies, and closing date. Once both parties sign, it becomes a binding legal document — enforceable in court if either side fails to perform.
- Purchase agreement – outlines the price and terms of sale.
- Addendum – adds new terms before the contract is signed.
- Amendment – modifies terms after both parties have signed.
✍️ Essential Elements of a Valid Contract
For a real estate contract to be enforceable, it must include specific legal elements:
- Offer and acceptance: Both parties must agree to the same terms.
- Consideration: Typically the agreed purchase price or something of value.
- Legal purpose: The property must be transferred for lawful use.
- Signatures: All parties must sign to make it binding.
- Competent parties: Both buyer and seller must have legal capacity.
⏳ Common Contingencies and Clauses
Contracts often include contingencies — conditions that must be met before closing. These protect both sides in case financing, inspection, or appraisal issues arise.
- Financing contingency – protects the buyer if their loan is denied.
- Inspection contingency – allows repairs or withdrawal if defects are found.
- Appraisal contingency – ensures the property appraises at or above the purchase price.
⚖️ What Happens If a Contract Is Breached?
When one party fails to meet their contractual obligations, it’s considered a breach of contract. Common examples include missed deadlines, refusal to close, or backing out without cause.
Depending on state law, the injured party may be entitled to cancel the sale, retain earnest money, or pursue legal action for damages.
🏡 Create a Compliant Contract with Brokerless
Brokerless helps FSBO sellers complete legally sound MLS listings and contracts with confidence — no 6% commission required.
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