A Real Estate Contract is a Legal Binding Contract
Besides getting ready for financing approval, understanding real estate contract is a legal binding contract may be the next most important step in the first time home buying strategy. Most home buyers in Frisco TX are excited about house hunting process and when they find “the house”, they are ready to submit an offer to the Seller.
The most important thing to know is that once your signature is on the doted line along with specific performances of the contract, the contract becomes legally binding between the Buyers and Sellers.
What Makes a Contract Legally Binding in Texas?
Just submitting an “offer” may not necessarily make it legally binding. However, with the next components of the contract, it makes it legally binding.
CAUTION: A real estate transaction is a complex transaction. Consult a Texas real estate attorney if you do not understand what you are signing to. Do NOT rely on your Texas real estate agents for answers.
A Real Estate Offer
A real estate offer must be extended. An offer should be in writing. “Verbal” offers are not taken seriously by Sellers and often disregarded. Also, due to the Statute of Frauds, contracts are required to be in writing to be enforceable. An offer that is extended should be held to a specific action upon acceptance of the offer. Here are some considerations to an offer made:
- Has the offer define the parties to the transaction? Noted the subject of the offer? Specified a timeline?
- Is the offer “serious”?
- Does the offer spell out the terms of the “offer”/ contract?
A Real Estate Acceptance
The “offer” that was extended must be accepted by the other party. Acknowledgement by the accepting party may be in writing or verbal unless noted otherwise. An offer must be accepted in its entirety (including terms to the contract). If one term/ item is not agreeable between the two parties, then the offer is “rejected”. If the party “rejects” and amend the offer, it becomes a “counter-offer”. The final acceptance must be the “meeting of the minds”.
Consideration for a Real Estate Transaction
For a contract to be legally binding, it must have consideration. Otherwise, it is considered as a gift. In a real estate transaction, part of the consideration is the exchange of monetary compensation (called Earnest Money) as part of the consideration although it is NOT required.
However, when making an offer in good faith, it is almost impossible for a Seller to accept a contract with no “show” of good faith other than a signed contract.
The contract needs to address the items below:
- Parties to the contract
- Legal description of the real estate property (to specific which property is bought/sold)
- Performance on the terms of the contract
- Breach of contract should either party fail to fulfill performance
TIME IS OF AN ESSENCE in a Real Estate Contract
This is where most buyers and Sellers fail to see the importance of an offer extended, an offer accepted and the execution of specific tasks in the real estate contract. Most buyers and sellers only harp on the sales price. They “forget”, “ignore” or “disregard” the specific datelines on the contract. More importantly, failure to adhere to these datelines can result in a breach of contract.
When Time is of an essence is specified in the contract, complete adherence by the dateline must be fully respected. When it is not specified in the contract, both parties can expect for reasonable times to perform. This is where buyers and sellers step into the “grey areas”. CONSULT a real estate about using this clause.
Some of the dates to note in a real estate contract are (not limited to):
- Option period
- Buyer financing approval
- Title commitment acceptance
- Survey delivery
- Homeowners association bylaws acceptance (if applicable)
In real estate contacts, the dates stated in the contract are CALENDAR days, not business days.
When a real estate contract is signed by both the buyers and sellers, it becomes a legal binding contract. The failure to adhere can result in liquidated damages and alot of heartache. Hence, be respectful of the contract.
In a Frisco TX real estate contract, there are 31 negotiable items in your real estate sales purchase contract. It is not just about SALES PRICE. In order to make your first time home buying experience most beneficial to you, work with an experienced Frisco TX Realtor®.
|Part 6: Should You Use a Realtor® When Buying Your First Frisco TX home?|
|Part 8: Home inspections & What to expect
Map of Frisco Texas
Contact 3:16 team REALTY (214) 783-2210 for more information about any of these homes, or assisting you in finding the best deal for your housing needs.
We can set up an appointment to meet and discuss.