The real estate contract is the most often used and perhaps the most misunderstood tool in the real estate business. The real estate contract is based on common law principles. Usually, there is an offer, perhaps a counteroffer, and ultimately an acceptance. Most real estate contracts are preprinted standardized forms, with open areas to allow individual, specific information to be filled in. The contract (or offer) is signed by the buyer and presented to the seller. It only becomes binding when a seller accepts the terms and signs the contract.
An acceptance is created if the seller agrees to the exact terms of the offer as they are written. If the seller agrees to almost everything but wants one or more items contained in the offer changed, then there is no acceptance or no ratified contract. Instead, the seller’s response becomes a counteroffer. The basic concept of a contract is mutual consent in every detail. A real estate contract must be in writing to be enforceable. A real estate contract is a bilateral, two-way, agreement. The seller agrees to sell and the buyer agrees to buy under very specific terms and conditions.
The contract must have consideration (or a purchase price) to be enforceable. The contract will outline specifically how the initial deposit and additional payments will be made until the transaction is finalized and the property actually changes hands. Of course, all contracts need to have signatures to be enforceable. The parties signing must be of legal age and of sound mind.
There are some differences in the types of contracts typically used in most California real estate transactions. Standard real estate contracts are “boiler plate” and are routinely modified or amended. Some of the more common areas where contracts can differ are in areas relating to the property condition, repairs, and conditions that constitute a default. A good Realtor will be able to point out and discuss the strengths and weaknesses of the various real estate contracts as you navigate your way through a transaction. Working with real estate contracts is just one of the many aspects of the transaction process that a buyer or seller will experience with their Realtor by their side every step of the way.
The real estate contract is virtually a road map for all the terms and conditions to which a buyer and seller mutually agree. If both parties follow the contract within the time frames allowed, a satisfying conclusion will result: the buyers will get the property they want, and the sellers will get their money.