A Seller's Guide: Understand the Contract

TLDR: Understanding the main components of an offer will help you make informed decisions and will prepare you for what happens after you come to an agreement on an offer with a buyer.

An offer is comprised of a collection of clauses that make up a contract. It’s not unusual (and we’d go as far as to say it’s common) for home buyers and sellers to simply sign on the dotted line when it comes to real estate contracts. Someone else assembles the paperwork and you just “sign here.”

We’d like to change that. 

Here, you can read as much (or as little) about the various elements of the contract and learn about the fine print to your heart’s content. We’ve also included a Too Long Didn’t Read (TLDR) summary at the top of each page in case you’re looking for a concise overview. 

The Contract Clauses

As the buyer fills out the form, their offer will be tailored for you with the customized verbiage appearing as you select and type answers. Here's a quick overview of the primary components of an offer.

The Property

This is the address and will specify any negotiated personal property that conveys with the sale

The Sales Price

The purchase price of the property

Earnest Money Deposit

How much you’ll keep if the buyer terminates the contract for any reason not stipulated in the contract 

Closing Cost Assistance

A cash equivalent of how much you’ll give to the buyer at closing, reducing the buyer’s cash to close

Home Warranty

Similar to homeowner’s insurance for interior items such as broken appliances, leaky faucets, etc. that is often paid for by the seller

Prorations

Describes how taxes and fees will be prorated at closing

Real Estate Commissions

Each party will be responsible for his or her own real estate agent 

Contingencies

These clauses are the reasons that allow buyers to terminate the contract without repercussions. Common examples include financing, appraisal, and inspection contingencies

Financing Contingency

This contingency allows you to walk away from the sale in the event that you’re unable to obtain financing

Appraisal Contingency

If the property doesn’t appraise for at least the sales price, you’ll be able to terminate the contract

Inspection Contingency

If you and the seller are unable to agree on terms about the repairs that need to be done, you’ll be able to walk away from the sale and still receive your EMD if you have this contingency

Radon Contingency

In the event that radon levels are higher than the recommended limit, you will receive your EMD if you decide to end the agreement

Termite Contingency

Should termites or termite damage exist, you will be able to walk away from the contract

Settlement and Possession

These are the day of closing and the day the buyer physically takes the property, respectively

Title and Title Insurance

This describes the transfer of legal ownership and rights

Disclosures

This is information provided by the seller about a property that may affect your interest in purchasing the property. Requirements exist at all levels of government and vary from state to state

Homeowners’ Association Disclosure

In Virginia, buyers are permitted three days after receipt of the Association Disclosure Packet to terminate the contract

Condominium Association Disclosure

In Virginia, buyers are permitted three days after receipt of the Resale Certificate to terminate the contract

Other Disclosures

Disclosures required of Sellers varies widely state by state. Disclosures are notices about the property. Incorrectly filling out disclosures or misrepresenting facts about a property can have legal ramifications.  

Miscellaneous Terms

Anything else you and the buyer would like to add to the contract

Survey

This is not generally a negotiated clause. Rather, the buyer has the option before closing to pay a surveyor for a map and legal description of the property.

Comment

This is a note to you from the buyer and is not legally binding

What can I negotiate?

The great thing about real estate is that the transaction is almost entirely negotiable and we’re working on adding more options for negotiation all the time. Would you like to avoid making a single repair before selling? Completely acceptable as long as the buyer agrees to it. Would you like to rent back the house for a month after you close so you can move your belongings into your new pad? As long as you come to an agreement with the buyer, it’s doable!

There are generally two categories of requirements that are non-negotiable, which include: 


When in doubt about what’s negotiable, ask!