Most real estate law issues involve the real estate sales contract. The purpose of a real estate contract is to clearly express the economic agreements between the buyer and seller. A poorly drafted contract invites legal disputes over financial terms which were not clearly addressed in the sales contract.
The buyer and the seller have different concerns and issues in a real estate contract. For example, a contract to buy real estate will tie up the property while the buyer pursues required government approvals and financing. The contract to sell real estate will avoid having the property off the market for too long unless the buyer is demonstrating an ability and commitment to close. Experienced real estate investors and their attorney over the years accumulate their collection of “killer clauses” which they try to insert in contracts to use to the detriment of the naive and ignorant adversary. A real estate contract, especially an investment sale or purchase, should be drafted and reviewed by an experienced attorney. People who do not read carefully the entire real estate contract may find that they have unwittingly made financial concessions which are enforceable at the closing.
Real Estate Contract In General
A real estate contract must be in writing and be signed by the buyer and seller. You cannot enforce what the other party promised or represented unless the oral statements are made part of the written agreement. There must be a written offer and written acceptance of the same contract. If both sides are exchanging alternative contract offers there is no contract unless both parties agree to the same writing. A mutually signed contract may be amended in writing prior to Closing.
A written real estate contract must contain some essential elements. For example, the contract must clearly describe the property being sold, and it must clearly express the sale and purchase price and essential contingencies. Contracts are not legally enforceable if a material term is ambiguous or if important terms are omitted from the final written agreement.
Contracts are formed through a process of negotiation comprised of an exchange of written offers, counter-offers, rejection, and acceptance. When you change any part of a contract offer received from the other side your change legally constitutes a rejection of the offer and a counter-offer by you to the other party. Your change may be very important, such as a price change, or your change may be relatively insignificant, such as a change to the “small print.” Any written change, cross-out, or insertion to an offer received constitutes a rejection of the entire offer. Understand that email exchanges may be considered a “writing” and could reject, accept, or amend a contract. Be careful about sending emails to the other party or their agents during a contract negotiation. Your email may legally constitute an acceptance of a contract you do not want to sign.
Standard Contract Forms For Home Sale and Purchase
Most people rely on standard real estate forms when they are buying or selling their primary residence. There are widely-used standard Florida contracts to buy and sell real estate. The best known standard contract form is the Florida Bar Contract which is jointly recommended by the Florida Bar and Florida Realtors. The Florida Bar reviews and modifies the standard contract form as needed to be consistent with changes in the law.
The Florida Bar also has standard riders (additional forms) to address most circumstances that either buyers or sellers would want addressed as requirements or contingencies. These riders include forms dealing with buyer financing, homeowners associations or condominium associations, or environmental issues, existing tenants, and clear real estate title. There is a Comprehensive Rider form which includes riders for most concerns of a buyer or seller.
In addition to the Florida Bar standard addendum forms the buyer and seller often draft their own riders and contract addendums as part of their written offer which addendums include provisions and clauses important to the particular transaction or one of the parties. The parties can also make handwritten changes to any of the contract forms. Examples of customized contingencies include making a contract contingent upon the seller buyer a replacement home or the buyer selling his existing property and arranging for the seller to finance the sale (owner financing).
You will find below in the discussion of contracts for commercial and investment real estate a discussion of so-called “killer clauses” which are designed to provide either buyer or seller with a legal advantage in real estate transactions. You may want to use one or more killer clauses in your residential real estate transactions if and when appropriate, and you do want to make sure these types of customized clauses are not used against you by the other party.
The standard Florida Bar contract, the standard rider, your own addendum, and written notation on these forms all together constitute your real estate contract. Where there are conflicts within a set of real estate contract documents the general rule is that the terms of the addendums and riders override the primary contract form, terms in the parties own addendum override terms in the primary form and riders, and that handwritten notations override all the standard forms. As stated above, oral agreements have no legal significance with few exceptions. The point is that the parties must carefully review all the contract forms, attachments, and notations to understand what they are agreeing to do.
When a primary residence is being sold both the buyer and seller want to deal to go through. While money is important, making money or saving money is not the parties only motivation. Primary home sales are less adversarial than commercial or investment real estate transactions which is one reason why most home sales close without either party getting an attorney involved. Standard forms are usually sufficient for both parties involved in the sale of a primary home. Nevertheless, having your home purchase and sale contract reviewed by an attorney is a good idea to make sure you have not overlooked something in the contract which will cost you money at closing or thereafter.
Customized Real Estate Contract.
Most transactions involving investment or commercial property involve customized real estate contracts. In these cases, money is the primary issue and neither party has an emotional or personal attachment to the property involved. Each side is trying to achieve their best price at their best terms so that commercial transactions are more adversarial than typical sales of primary residences. The commercial real estate transaction also includes more legally and commercial complex. Therefore, most parties have attorneys represent them draft or review customized contracts and contract clauses in the course of negotiating the purchase and financing of commercial and investment real estate deals.
Customized real estate contacts must be carefully reviewed and drafted. Short written provisions may have a substantial economic impact on either the buyer or the seller. Certain contract terms and language may provide a significant and valuable advantage to either the buyer or the seller. Each party may try to insert in contract drafts legal provisions that will give them an advantage. Experience real estate attorneys acquire through years of experience favorite legal provisions that they use in real estate contracts to help their client. A sample collection of these contract provisions, so- called “Killer Clauses”- are presented for your consideration in discussions of purchase contracts and sales contracts, respectively.