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Writing a Solid Contract

Updated: Oct 25

THERE ARE ALWAYS RISKS OUR JOB IS TO MINIMIZE THE RISKS. HERE’S HOW:

· When you are purchasing a home, investing in property, or land, buying real estate can be a big investment and many times the biggest investment you will make in your life.

· Whether you’re a first-time buyer or first-time seller or a seasoned real estate investor, the decision to buy or sell depends upon the successful purchase or sale of a property.

· Real Estate Transactions are rarely without issues questions or concerns, that Is why a seasoned professional with practical experience is important.

a. How often have one of you had a transaction without any issues? (Almost never right haha)…

· Whenever someone enters into a real estate transaction, or any contract, there is an element of risk. If a contract is poorly written or unenforceable, the consequences can be devastating.

· Buyers and Sellers need to always do their due diligence in order to fully protect their rights and interests.

· The best way to ensure that you are protecting yourself is through a well-drafted contract written by an experienced Professional REALTOR®. And we can do that for you – that’s why we are in this business

REAL ESTATE PURCHASE AND SALE AGREEMENTS ARE VALID CONTRACTS WHEN…

· But they must contains 3 elements- For a contract to be valid it must

1. the offer (an agreement presented to the seller to purchase)

There are times when I’ve written an offer and my buyer thinks that a contract is in place.. it is not because it does not contain all the elements

2. The acceptance (of the offer by the seller with signature and date)

Sometimes Sellers don’t accept the terms, but they are willing to negotiate and write a counter offer.

It’s important for a buyer to understand that during this time of negotiating there is no “binding contract”… either party can back out or the seller can accept another offer during this time.

This is a period of time I have heard mainly from buyers and sometimes brokers.. “this isn’t fair”.. be aware unless all is clearly stated and signed it is not a valid contract, even when all signed it is not valid unless it has this one final element…

3. The consideration (earnest money)

Why this is important? and how many days after the agreement has been signed does a buyer have to give “consideration”

· There are no “standard” terms for a Contract of Purchase and Sale.

a. However most Real Estate Brokers use standardized forms and clauses.

b. These are very helpful in our industry to protect both Buyer and Seller.

c. These forms cost Realtors money to use – they are copywritten and protected and licensed,

d. They have our names printed at the bottom of every page that we are licensed and authorized to use the forms (This form has been licensed for use solely by Carla Powell pursuant to a Forms License Agreement with Oregon Real Estate Forms, LLC.)

· Sometimes these standard forms can be inadequate so additional information is needed based on the nuances of the property being acquired and the interests and motivations of the parties involved.

· In these circumstances explanatory Exhibits, Addendums, and or Amendments are attached to the Contract.

· Sometimes "clauses" are added as well, and can be found on the Addenda, or in the body of the contract, clauses identify a particular section of a contract – They can be such things as “An acceleration clause” “An escalation clause” or a “Inclusions and exclusion clause” which outlines what will be included with the property and what will not stay.

· For instance, your client has a dining room set that the buyer has asked to be included in the sale. Your client agrees. The dining room set is added as a clause in the contract stating it will be an inclusion in the sale. Likewise, when the buyer walked through the backyard there was a large playset. The seller intends to take the playset with them, and it is listed as an exclusion because it is not included in the sale of the home.

· And what is important is how clearly and understandably they are written to avoid confusion with either party or cause one party to refuse to sign because of it.

· There is no one-size-fits-all: For some contracts, a few clauses will suffice, in others, the clauses are far more numerous and complex. And there are numerous addenda and amendments and exhibits. We all love a simple contract but, in some circumstances – clarification and other extensions are needed.

· It is so important to write these in such a way as to protect you our clients.

WORDS MATTER

1. When it comes to contracts, every word matters. Nothing is implied. If it is in writing, then it exists. If it is not stated, it cannot be assumed.

2. When we have negotiated for something, we PUT IT IN WRITING. If your contract has already been accepted, and something new is added or omitted, we draft a written addendum to cover any and all changes, regardless of how small or seemingly insignificant they may be at the time. And both parties must sign it for it to be binding.

3. Like any other type of contract, a purchase and sale agreement is legally binding so It’s important to remember that there really is not much room for buyer’s or seller’s remorse. You can’t just send it back or take it back to the store to exchange 

4. Once both the buyer and the seller sign a purchase agreement, they have entered into a legally binding contract.

5. If one party fails to adhere to the contract, the other party generally has the right to take legal action to recover damages from any harm that the first party’s failure to perform has caused.

6. There are far too many instances where one party has sought legal action to force the other party to perform the terms and conditions agreed to within their contract. That is a situation that we don’t want our buyers or seller to find themselves in. It is our goal to keep all parties informed along the way to avoid misunderstanding.

UNDERSTAND WHAT YOU’RE SIGNING

1. It is always in your interest to fully understand the implications of every single term and condition contained in any contract you sign.

2. This is said over and over again, but it’s worth repeating and I cannot stress this enough: READ WHAT YOU ARE SIGNING.

3. Many people will simply sign a contract that can be worth millions of dollars without even reading it, only later to find out that they have in fact agreed to many things, like build a fence, install new blinds on every window in the house, repaint the house, replace appliances etc. If you do not understand what is written in a contract, ask questions. If the wording is unclear, you must insist that the wording is corrected.

4. Lack of fluency in the English language is not an excuse. If your contract were to end up in front of a judge and you were asked why you signed something that was unclear or did not make sense, what would you say? You would likely have no recourse.

MAKE AN INFORMED DECISION

1. NEVER feel pressured to sign something that you do not understand. A good REALTOR® will take the time to go over a contract with you.

2. This is what we are paid to do. You can also always talk to a lawyer or our managing broker to simply get a second opinion if needed.

3. It is critical that your Contract of Purchase and Sale is tailored to your specific circumstances and is drafted by a knowledgeable and experienced REALTOR®.

4. In negotiations, there is no substitute for knowledge and experience. Hiring the right REALTOR® who has an intimate understanding of contracts will put you in a better position to negotiate, and to protect your interests and ultimately get you what you want.

© 2020 Powell Team a division of Fred Real Estate Group

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