Residential Real Estate Sale Contract by Owner/More Info


Residential Real Estate Sale Contract By Owner
 Additional Information

For most people, the purchase of the family home is the largest and most important investment they make.  It is typically a family decision that involves where the family will live for a long period of time.  However, this type of purchase is very complicated from a legal and financial point of view.  Many approach a purchase with a view only towards making sure the price is fair.  However, the special nature of all real estate transactions, big and small, demands that the parties pay careful attention to contractual matters.  Usually, a substantial amount of money is put up as an earnest money deposit to ensure that the prospective buyer is making a serious offer and that the seller cannot offer the residence to another potential buyer while the first potential buyer is doing all of those things necessary to arrange financing, inspect the residence for faults and arrange to move in.  The buyer will lose his earnest money deposit if he unfairly decides not to go through with the purchase of the residence.  

Often, this contract is simply a form supplied by the seller's agent and filled out by the parties.   While this may lead to a satisfactory transaction, both buyer and seller often misunderstand the meaning and importance of many contractual provisions and the options that are available. 

The Contracting Process 

After a buyer finds a house he or she wants, the practice is to make an offer to the seller.  The offer is usually first made orally, often to the seller's real estate agent (if there is one).  However, increasingly sellers are selling their home without benefit of a real estate agent.  If there are special conditions, it's best for the buyer to tell them to the seller with the initial oral offer, just in case there is a problem.  The process may involve a counter-offer from the seller, another counter from the buyer, and so on.  The parties should soon know if they have an agreement on price and other key terms, or if they will be unable to agree. 

As soon as there is agreement on price, it is customary for one of the parties (usually the buyer) to submit a written agreement to the other.  Using the Home Attorney contract, the seller or buyer can customize the language to fit the proposed transaction.  The written contract is signed by one party and submitted to the other party. This signed contract constitutes a formal offer.  The contract provides for the person making the offer to designate a date and time by which the contract must be signed and returned or the contract offer expires.  Alternatively, the buyer or seller may skip the oral negotiations and simply begin by using the Home Attorney form to generate a written offer. 

Because of the importance and the complexity of these transactions, both buyers and sellers are advised to review the contract, the advice and the Home Legal Guide topics well before putting a house on the market or beginning to look for a new home.  This review will help you understand all of the contract issues that should be in mind when negotiating and completing your deal. 

Financing Addendum

The financing addendum that is a part of this contract provides for a specific description of the financing terms that the buyer has arranged with his lender for the purchase of the residence.  The terms of this addendum become a part of the contract and assure and promise the seller that the buyer has arranged the necessary financing terms to allow him to purchase the residence from the seller. 

Additional Information 

Although this form is designed to handle a basic transaction, buyers and sellers are free to negotiate different terms or add terms.  For example, a buyer is sometimes able to persuade a seller to absorb some costs normally paid by the buyer, such as loan origination fees.  Consult an attorney before signing to make sure the contract terms, especially any new or different ones, are proper and appropriate. 

Local Laws and Customs

Real estate law principles are fundamentally the same all over the United States but, like other areas of the law, there is some variance from state to state.  Almost as important, real estate practice and customs also vary, sometimes even within the borders of a single state.  Every state, and nearly every county, has a real estate board or association that prepares approved contract forms for use in their area.  Bear in mind that real estate agents and banks may not be familiar with other documents and this could lead to delay or problems in closing your transaction.  Check the approved forms in your area and talk to local agents and lenders to see if use of another form is a problem or if you need to consider any local practice or custom.  As always, consult with a local attorney for more help and information. 

Other Kinds of Property

Note that transactions involving condominiums, cooperative apartments, farmland and other special kinds of property will require a different form.  Transactions in these kinds of property involve special considerations, such as the transfer of stock and maintenance contracts with condos and coops, and crop rights, tenant farming and mineral rights with farmland.  Also, the Home Attorney form does not address water rights (important for lake, river, or oceanfront property) or rights of "ingress and egress" (when the property used to access the house is owned by someone else). You should talk to a knowledgeable attorney before proceeding with a transaction involving these or other special issues. 

Real Estate Agents 

This form does not contemplate the use of an agent by either party, but nothing in the form is intended to prevent or discourage using an agent.  A licensed real estate professional can provide valuable assistance, especially where a party has never bought or sold property before or is new to the area. 

Compensation of agents is generally a matter of agreement between the agent and the party with whom the agent has contracted. Traditionally, the seller has paid a commission of 5% to 7% of the sales price to the listing agent.  If buyer also has an agent, the practice has been for the seller's agent to split his or her share of the commission with the buyer's agent.  If the buyer has an agent and the seller does not, the seller does not normally owe anything to the buyer's agent. 

If you are selling and you elect to use an agent, remember to review and carefully consider the listing agreement.  If you are buying, you should not be obligated to pay anything to either agent unless you have expressly agreed to do so in advance. 

Lead-Based Paint Disclosure

Many houses built before 1978 were painted with a lead based paint.  Ingesting lead can cause lead poisoning.  The risks of lead poisoning are particularly serious for babies and infants.  Often, small children will eat the lead chips from peeling walls, or inhale dust particles containing lead created when remodeling work is done. 

To help reduce this health risk, Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992.  This law is jointly administered by the Environmental Protection Agency (EPA) and the Department of Housing and Urban Development (HUD).  Pursuant to that law, EPA and HUD have written regulations requiring that anyone selling or leasing a residential property built before 1978 make written disclosure about the risks of lead paint before a sale is completed or a lease of the property is signed.  The regulations require that a buyer be given at least 10 calendar days to have the property inspected for assessment of lead-based paint risks.  (A copy of the disclosure form to be signed by the parties is available in Home Attorney.)  Those regulations took effect in September, 1996. 

In addition to the disclosure in the form required by the regulations, the seller or landlord must provide, and certify that the buyer or tenant has been provided, a copy of the EPA pamphlet, Protect Your Family from Lead in the Home.  A copy of that pamphlet is included in the Home Legal Guide.  You may print that pamphlet from the Home Legal Guide to provide to a buyer or tenant, but call the EPA to make sure it is the current version if you will use it to comply with the regulations.  You may also get the latest copy of this pamphlet by calling the Lead Information Center (number below).  The pamphlet may also be retrieved electronically over the Internet from the EPA's website at: http://www.epa.gov/lead/. 

Remember that the state where the property is located may also have its own laws and regulations regarding lead paint.  For example, New York City has significantly more strict regulations for landlords, requiring abatement (i.e., removal) of lead based paint from residential rental property.  Contact the state attorney general's office of consumer affairs, your city health department or codes administration office, the local real estate board or an attorney if you have any questions. 

For more information about the risks from lead paint, call the National Safety Council's Lead Information Center at 800-424-LEAD (800-424-5323). 

Mandatory Seller Disclosure

No house, even the newest one, is completely free of defects.  Unfortunately for buyers, many serious physical defects are not discovered in the course of a pre-purchase inspection.  Even worse, many substantial defects can be concealed until the purchase is completed. 

Until very recently, the rule in most states was "buyer beware".  In other words, the seller had no obligation to point out defects before the sale.  The buyer's only protection was to thoroughly inspect the house, ask the seller direct questions, and hope for honest answers. 

Following some landmark cases in the late 1980's and early 1990's, the law began to change.  At least 25 states have enacted laws requiring that sellers and/or their real estate agents make written disclosure about a house to be sold.  At the end of this discussion is a list of the states with these mandatory disclosure laws and a brief discussion about each law. 

If you are selling your home yourself (i.e., there is no seller's agent), check with a local real estate broker or attorney, or call your state's attorney general's office, to see if your state has a disclosure law.  You can contact the attorney general's office in your state by visiting the National Association of Attorneys General at http://www.naag.org/.  Most states with mandatory disclosure laws also have created approved forms to make the disclosure.  In those states that do not have mandatory disclosure laws, the state Realtor associations have instituted voluntary disclosure programs.  If you are a seller dealing with a Realtor in one of those states, you will be asked to complete the association's form.  You can find specific information about realtors from state to state at the National Association of Realtors website: http://www.realtor.org/.  

Make sure you find out what the law covers.  The items that must be addressed in a disclosure vary from state to state.  Some apply to owners and agents, while others apply only if a seller's agent is involved.  Most do not cover newly constructed homes that have never been occupied.  Some laws relate only to physical defects in the house itself, while others are broadly written to cover things like noisy neighbors and problem odors.  Some of these laws are very new and have not yet been interpreted by the courts.  Some laws may be implemented only with regulations adopted by new real estate commissions.   In other words, the law in this area is changing rapidly.  Regardless of whether you are a buyer or a seller, make sure you know what the law requires before you proceed. 

Federal, State and Local Rules, Regulations and Policies can be found at the National Center for Healthy Housing at http://www.centerforhealthyhousing.org/html/regs.htm

States with mandatory disclosure laws and a brief description of the law in most of those states including websites: 

Arizona 

Arkansas - Applies to residential houses, except those that have never before been sold. Provides for state approved forms.  http://www.healthyarkansas.com/faq/faq_lead.html

California - Applies to residential houses, except for some of those that have never before been sold.  California Association of Realtors has prepared an approved form. 

Colorado 

Connecticut 

Delaware - Applies to residential houses, including those that have never before been sold.  Provides for state approved forms. 

Georgia 

Hawaii - Applies to residential houses, except some that have never before been sold. 


Idaho - Applies to residential houses, except those that have never before been sold.  Provides for state approved forms.   http://www2.state.id.us/phd1/env_lead.html


Illinois - Applies to residential houses, except those that have never before been sold.  Provides for state approved forms.  http://www.idph.state.il.us/public/hb/hblead.htm


Indiana - Applies to residential houses, except those that have never before been sold.  Provides for state approved forms. 

Iowa - Applies to residential houses.  Law dictates what information must be included in disclosure.  http://www.idph.state.ia.us/eh/

Kansas 

Kentucky - Law applies only to sellers who work with a licensed real estate agent.  Does not apply to new construction, provided contractor certifies compliance with certain construction requirements. 

Maine - Real estate agents must ask seller for certain information and disclose to prospective buyers.  No exemption for new property.   http://www.state.me.us/dhs/bohdcfh/led/index2.htm


Maryland - Applies to residential houses, except those that have never before been sold. Provides for state approved forms.  http://www.mde.state.md.us/health/lead/index.html. http://www.mdpublichealth.org/och/html/lead.html. 

Massachusetts - Applies to residential houses, except some that have never before been sold.  Provides for state approved forms.   http://www.state.ma.us/dph/clppp/clpppfac.htm

Michigan - Applies to residential houses, except those that have never before been sold.  Law dictates what information must be included in disclosure. 

Minnesota 

Mississippi 

Missouri 

Nebraska - Applies to residential houses.  There is no exemption for new property. 

New Hampshire - Applies to residential houses.  There is no exemption for new property. 

New Jersey 

New York 

North Carolina 

North Dakota 

Ohio - Applies to residential houses, except those that have never before been sold.  Provides for state approved forms.  http://www.odh.state.oh.us/odhprograms/lead_ch/leadch1.htm

Oklahoma - Law applies only to sellers who work with a licensed real estate agent, except when buyer makes written request for a disclosure statement.  Does not apply to new construction.  Provides for state approved forms. 

Oregon - Applies to residential houses, except those that have never before been sold.  Provides for state approved forms.  Special provision permits a seller's disclaimer and a buyer's revocation offer in limited cases.  http://www.ohd.hr.state.or.us/esc/lead/welcome.htm

Pennsylvania 

Rhode Island - Applies to residential houses, except those that have never before been sold.  Provides for state approved forms.  http://www.health.state.ri.us/family/home.htm

South Carolina 

South Dakota - Applies to residential houses, except those that have never before been sold.  Provides for state approved forms.   

Tennessee - Applies to residential houses, except those that have never before been sold.  Seller may alternatively provide a disclaimer form if buyer waives right to disclosure statement.  Provides for state approved forms. 

Texas - Applies to residential houses, except those that have never before been sold.  Provides for state approved forms.  http://www.tdh.state.tx.us/lead/default.htm

Vermont 

Virginia - Applies to residential houses, except those that have never before been sold. Provides for state approved forms.   http://www.vdh.state.va.us/epi/leadf.htm

Washington - Applies to residential houses.  Provides for state approved forms.  No exemption for new property. http://www.doh.wa.gov/EHSPHL/Epidemiology/NICE/Lead/default.htm

Wisconsin - Applies to residential houses, except those that have never before been sold. Provides for state approved forms.  http://www.dhfs.state.wi.us/programs.htm

IMPORTANT TIP: 
Some residential real estate sale contracts also contain an agreement that if the buyer financially qualifies to purchase the residence the buyer must specifically perform, at the option of the seller, if certain conditions are met.  This usually means that if the buyer qualifies financially to buy the residence according to the terms of the contract, he must follow through and buy the residence even if he is later unable or unwilling to complete the transaction for some reason other than financial qualification.  One other reason sometimes involves a family decision to lose the earnest money deposit because the family has chosen another residence it likes more than the residence under contract.  Remember that all sellers and all buyers must sign this Contract.  If married persons are buyers or sellers they must disclose that they are signing as husband and wife.  If a single person is a seller or a buyer that person must disclose that he or she is singing this Contract as a single person.  Also be aware that this Contract is not legally valid unless it includes the Seller's Disclosure - Statement of Condition with regard to the property and a Lead-Based-Paint and/or Disclosure form, if applicable.