Typical Provisions in a Seller’s Real Estate Sales Contract

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jun 29, 2022

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Given the fact that the sale and purchase of real property can be a complicated and lengthy process, there are no single provisions in a real estate purchase contract that is the most important provision of the contract for sale. Rather the contract as a whole with all its provisions is important for the seller as well as the buyer. 

That said, the seller will want to be sure that the contract specifies:

(1) The purchase price,

(2) Whether or not the buyer will need to obtain a loan to buy the property,

(3) How much the deposit will be for the purchase (assuming a deposit is required), and if the seller is entitled to damages (usually the deposit) if the buyer does not fulfill his or her end of the contract,

(4) The slated date for the close of escrow where legal title is then transferred to the buyer from the seller,

(5) The name and location of the escrow company, and

(6) Who will pay what aspects for the “closing costs” (escrow fees, title insurance, recording fees and the like) and the broker’s commission (when is it payable: on signing the contract or upon close of escrow?). 

Contingency requirements in a real estate contract

Other significant features for the seller are whether or not the buyer will have any contingency requirements to close the sale and will be taken care of in a reasonable amount of time. A contingency in a written contract is a provision allowing the buyer to possibly avoid buying the property after the agreement is entered into with the seller.

Typical contingency requirements are the buyer’s ability to inspect the property with third party experts such as a licensed contractors, a licensed home inspector or a licensed pest inspector to make sure that the structure’s integrity is sound. Another common contingency is financing: the buyer is to get written confirmation that he or she is guaranteed a loan for a set amount at a certain interest rate for a certain period of time.

As a general rule, sellers prefer no contingencies for the sale of the property and if there are contingencies, the time period to waive the contingency ordinarily is as short as possible from the seller’s side, so as to lock the buyer into the sale and have escrow close sooner rather than later. 

Advisories in purchase contract

Sellers generally prefer written advisories (warnings) in the purchase contract to the buyer about the need to use their own due diligence to inspect the property thoroughly before escrow is closed, so that they have no surprises as to the home’s condition after close. In many circumstances, the seller of the property may not be aware of possible water intrusion issues, termites or other problems with the home that are not readily visible.

Attorney’s fee clauses in real estate contract

Opinions vary as to whether it is in the seller’s best interest to have an “attorney’s fee provision” in the purchase agreement.  The provision allows attorney’s fees to the prevailing party when there is a dispute betwen the buyer and seller after the close of escrow. An “attorney’s fee clause” may be drafted in this manner:  “In the event of any dispuite between the buyer or seller arising out of this agreement, the prevailing party to any legal proceeding would be entitled to his or her reasonable attorney’s fees from the other party.”

Sentiment is that in the event of a sale of real property where escrow closes, the person most likely to file suit would be the buyer. Accordingly, an “attorney’s fee clause” would be one factor by the buyer to file suit. Unfortunately, the “attorney’s fee clause” in a real estate contract is a factor in prolonging many lawsuits by creating a lot of unnecessary expenses for the buyer and the seller for the fees each are obligated to pay their attorney. It is recommended that the seller not have an “attorney’s fee provision” in the real estate purchase contract. 

Mediation of disputes

However, important provisions for resolving any dispute short of trial such as a mediation provision (means to resolve by way of a settlement conference) are important and helpful in resolving an issue quickly and without much expense.

Pre-printed real estate contracts

Many professional real estate associations have over the years created and modified pre-printed real estate contracts that contain many of the important provisions that a seller will want in a real estate contract to protect his or her interests. It is suggested that such agreements be considered as the format for any real estate transaction in that they have been proven to withstand the test of time.

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