Real estate agents are faced with countless contracts throughout the course of their career. However, while many of these legally-binding documents are practically a ‘standard’ in most real estate transactions, there are also some which are only needed under special circumstances or upon request.
Understanding each line of every contract that real estate agents encounter can be overwhelming, even for realtors who have been in the trade for a while. Thus, it’s a norm for agents to hire or work alongside a lawyer who can quickly translate and validate contracts that require extra attention.
Even then, it’s still important to familiarize yourself with contracts that could come up anytime during negotiation. This way, you can easily lead clients to a smoother transaction and build your reputation as a bona fide real estate expert in your area.
Types of Real Estate Contracts
Purchase Agreement or Sale Contract
A sales contract is needed when a buyer has finally decided to make an offer. In this type of agreement, the seller indicates essential details of the purchase, including:
- Identification of the parties
- A description of the property
- The essential details, rights, and obligations of the contract
- Any contingencies or conditions that must be met before the sale can go through
- The condition of property
- What fixtures and appliances are included and what is not included
- The amount of the deposit
- Itemized closing costs and who is responsible for paying for each of them
- The prospective date of closing
- The signatures of each party
- Terms of possession
The sale contract is the most common type of real estate agreement and will usually specify the details regarding the purchase of the property. The contract strictly needs the approval and signature of both the buyer and seller.
When the buyer and seller have separate realtors representing them, they will have to sign an exclusive contract with their respective agents. When signing, the seller is given a contract typically referred to as an Exclusive Right to Sell Contract, which gives the agent exclusive rights to list and sell the property.
A buyer, on the other hand, signs what is often called an Exclusive Buyer Agency Contract, which binds the client to exclusively use the signed agent to purchase a home.
There are cases when the buyer must first complete a Financing Addendum. By attaching an addendum to the Purchase and Sale Agreement, the home buyer is making it known that they are obtaining a loan/third-party financing to purchase the property.
The addendum provides the buyer the ability to terminate the contract if they can provide a written notice to the seller that they cannot obtain credit approval within the time specified in the addendum. On the other hand, the addendum may also cancel any previous agreement when the buyer changes the type of loan or changes their lender without the seller’s prior written consent after the agreed-upon time to apply for financing expires
Federal law requires sellers to complete a Lead-Based Paint Disclosure contract for homes that were built prior to 1978. This contract allows the potential buyers and renters to receive certain information about lead and lead hazards in the residence prior to becoming obligated to buy or rent the property.
The Bottom Line
A sound and reputable agent should know which contracts are necessary during the different stages of the sale, as well as the capacity in which each of them are needed under certain scenarios. Terms and conditions also vary per location, which is why you must take your state’s real estate continuing education promptly or when important updates come in.
Just remember, you don’t have to wait until you’re license expires, you can stay in the loop fast and easy with our comprehensive, on-demand real estate online courses.
Written and Published by: VanEd