Real estate—also known as real property or realty—is land and anything growing on it, built on it, or attached to it—whether naturally occurring (trees, grass) or man-made (buildings, roads, fences).
A contract for the sale and purchase of real estate (real estate contract) such as a home will include the legal description of the property, the purchase price, and any financing terms if the parties agree to seller financing.
A real estate contract will also often include clauses or provisions that identify conditions that must be met or things that must occur by a specific date in order for the parties to complete the transaction. These conditions, events, or occurrences are known as contingencies, as the completion of the transaction is contingent upon them.
Some common contingencies in real estate contracts include:
• the buyer securing financing at a specified interest rate
• the results of home inspections and resolution of any defects discovered
• the buyer being able to sell their current home (sale and settlement contingency)
• the buyer closing on an existing sale contract for their current home (settlement contingency)
• the closing occurring by a certain date—often 30, 45, or 60 days following the signing of the contract
Contingencies create some risk for sellers, as potential buyers may not continue to be interested in a home that is under contract—even if the contract has contingencies in it.
Another important issue to include in a contract for the sale of real estate is who will pay for which closing costs—including escrow fees, title search fees, title insurance, notary fees, recording fees, and transfer taxes.
And if a buyer wants the refrigerator, stove, oven, dishwasher, barstools, window treatments, washing machine, outdoor grill, or any other fixtures or appliances, the buyer should not rely on a spoken (verbal) agreement or understanding with the seller. Instead, the buyer should make sure the contract specifies any such items that will be included in the transaction.