The 6 Major Components Of A Real Estate Contract

Contracts for buying and selling properties are central to real estate law. For many people, these contracts are the biggest financial arrangements of their lives. Understanding the components of a real estate contract is important. A real estate attorney will want you to be aware of these six.

Purchase Terms, Including Price

Arriving at an exchange of money or other assets for the property is the point of the contract. The terms of the exchange should be clear. You should state whether there will be any deposits or down payments. Likewise, you should outline what the payment structure will be.

It is also wise to note whether a financial institution will be part of the deal. If so, include the name and contact information of the bank that will underwrite the mortgage.


The closing date is when the two parties should conclude the deal. On this date, the buyer should take possession of the keys and the property. If a bank is involved, it will get the title until the mortgage is paid. Otherwise, the buyer will get the title immediately.

You should also outline what the closing costs will be and who will cover those. Closing costs may include transfer taxes, title insurance, filing fees, and attorneys' expenses.


You may also want to include a termination clause. This outlines the circumstances that allow either party to call off the deal. Many contracts include a penalty to discourage parties from casually terminating deals.

Dispute Resolution Mechanisms

If there are any disputes, the parties should've already agreed on a resolution mechanism. Arbitration is a common mechanism. If the mechanism leaves the door open for adjudication, this section of the contract should determine the venue.


The contract also should specify what the parties have to do before the contract is binding. A common contingency is that the buyer has to obtain a mortgage agreement from a bank. A buyer also might want a seller to produce a clear title for the property before the contract takes hold. Parties also frequently include inspection requirements. A real estate attorney may also integrate an independent appraisal into the contract.

Representations, Warranties, and Guarantees

When a seller lists or shows a property, they usually make representations about the condition of the property. A buyer may want the seller to warrant or guarantee these representations. Many buyers request warranties based on the condition of the roof and foundation.

Reach out to a real estate attorney to learn more.