December 27, 2018
When a Real Estate Contract Becomes Binding
At Topouzis & Associates, P.C., we understand that, for many potential parties to a real estate transaction, the nature of contract law and real estate law is less evident than it is to experts like ourselves, who deal with the ins and outs of the industry on a daily basis. And where a home purchase is concerned, the first major contract into which the parties will enter is the real estate contract. Naturally, the status of this document causes a level of concern and consternation for those with little experience in real estate, who often want to know: When does this transaction become something I can’t back out on?
Put simply, the real estate contract is a binding document, which comes into the equation once a property’s seller has decided to accept the offer made by a prospective buyer. Also known as a purchase agreement, it is the official set of rights and duties shared between the two parties to a transaction, and lays out expectations of behaviors and actions to be taken by the parties, including the amount of time in which each action should be taken. As such, it is at the heart of any pending real estate transaction.
Once both parties have signed it, it becomes binding.
At this point, each party must then begin to take action on their rights and duties: the buyers to take steps toward getting their various legal and lending requirements in place, and the sellers to start with the process of vacating the premises, which usually means locating a new home to move in to.
Of course, it’s important to recognize that, despite the real estate contract’s putatively binding nature, there are often contingencies built into the document. This is because real estate transactions can be somewhat unpredictable; and nobody wants either side of a purchase to be forced to take on undue hardship because of factors that prove beyond their control. Contingencies are qualifications on the binding nature of a contract; they lay out conditions precedent to the full enactment of the purchase, and may end up delaying closing if not fulfilled in time, or even in the cancellation of the contract altogether if they cannot be met, as in the case of a failed inspection the cause of which is a problem with the property whose scope goes well beyond what the seller can remediate in a timely fashion. This cancellation of contract would permit the buyer to get back any earnest money they may have put into escrow.
Should the contingencies to a real estate contract be met, on the other hand, and the transaction proceed to its conclusion, we here at Topouzis & Associates, P.C., stand ready to aid at closing. Not only do we act as a bulwark against problems of the past, performing title searches and ensuring clear title to property—we also back our services with offerings of title insurance (click here).