Contracts
How to Read a Real Estate Contract: Key Sections Explained
The purchase agreement is a multi-page legal document with far-reaching consequences. Most buyers sign it without fully understanding what they've agreed to — and some agents let them. An agent who can walk clients through every key section builds trust, prevents surprises, and limits liability for everyone.
Critical Sections of a Purchase Agreement
Price and Financing Terms
Purchase price, down payment amount, loan type and amount, and financing contingency terms. Confirm the loan type matches what the lender has pre-approved. Note the financing deadline — missing it can void the contingency.
Earnest Money Details
Amount, who holds it (title company, brokerage), when it's due, and under what circumstances it's forfeited vs. returned. Know which contingencies protect the deposit and what triggers forfeiture.
Contingency Deadlines
Each contingency has a deadline. Inspection, financing, appraisal, HOA review, title review — all have specific timeframes. Missing a deadline may automatically waive the contingency. Calendar every deadline on day one.
Inclusions and Exclusions
What stays with the property (fixtures, appliances, window treatments, mounted TVs)? What goes with the seller? Disputes over inclusions are among the most common post-contract conflicts. Be specific.
Closing Date and Possession
Closing date is when title transfers and money changes hands. Possession date may differ (seller may need additional days after closing, or buyer may take possession early). These are negotiable and very important to both parties.
Default and Remedies
What happens if the buyer or seller breaches? Buyer default: seller may keep earnest money; may sue for specific performance. Seller default: buyer typically receives earnest money back; may also sue. Know what your contract says about remedies.
Contract Reading FAQ
Should I have an attorney review the purchase contract?
In attorney-closing states, yes — that's standard practice. In title-closing states, buyers and sellers often sign without attorney review. For standard transactions using the state's approved standardized form, attorney review may be unnecessary. For complex situations — unusual properties, prior title issues, significant concessions, commercial property — attorney review is worth the cost.
What is 'as-is' in a real estate contract?
'As-is' means the seller will not make repairs or provide credits for defects discovered during inspection. The buyer accepts the property in its current condition. However, 'as-is' does NOT waive the buyer's right to inspect — buyers can still conduct inspections and exit the contract if findings are unacceptable (assuming an inspection contingency is in place). Sellers must still disclose known material defects.
What is specific performance in real estate?
Specific performance is a court remedy that forces a party to complete the transaction as contractually agreed, rather than just paying damages. Because each property is considered unique, courts can order specific performance in real estate — unlike most goods. A seller who changes their mind after signing can be forced to sell. A buyer who walks away may be forced to complete the purchase.
Can a contract be changed after both parties sign?
Yes, through an addendum or amendment signed by all parties. Never modify a real estate contract verbally — changes must be in writing. Common amendments: extension of closing date, price adjustments after inspection, modification of contingency deadlines, addition of personal property items. Keep all amendments organized with the original contract.