Real Estate Contracts Explained

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Pricing, Financing and Earnest Money

The first few sections of a real estate contract have to do with the sales price of the property and the type of financing that will be utilized to complete the property purchase. The total sales price on the property will be the financed amount minus any down payments.

These sections will also deal with the earnest money deposit at the title company. Earnest money is an amount that is given to open an escrow account with the title company and is credited to closing costs upon completion of the purchase in favor of the buyer.

Mediation and Special Provisions

The next few sections of a real estate contract will have to deal with mediation in the result of a dispute arising prior to closing as well as any special provisions having to do with the contract.

Mediation is a resource offered to buyers and sellers to amicably resolve any type of dispute in reference to the property prior to closing that cannot be resolved by the parties themselves or their real estate representation.

The special provisions section of the contract pertains to adding any applicable real estate addenda for repairs, non-realty related items and homeowner association documents. This section is used to represent only material facts in a transaction and not intended to be utilized for special requests in regard to seller concessions or any non-addendum-related items.

Seller Concessions

The last and final section of a real estate contract pertains to seller concessions in the form of home warranty requests and/or closing cost assistance requested to be gifted to the buyer out of the seller's net proceeds on the property. This is one of the most important sections in the real estate contract, as this is what will dictate the final net price of the property prior to closing. The net price of the property is the final sales price minus seller concessions for closing costs or repairs and is what is used when searching for comparable sales in appraisals or market value of surrounding areas.

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References

  • Essential Guide to Real Estate Contracts;Mark Warda; 2003
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