For residential real estate transactions where an agent is involved, the realtor may prepare the standard form real estate contract. Once signed by both parties, the contract is subject to three (3) day attorney review, where both buyer and seller have the option of reviewing the contract with their attorney. If either attorney finds the contract unacceptable, they may send a letter of disapproval cancelling the contract.
The attorney may send a letter of disapproval with proposed changes or additional terms that if agreed to would make the contract acceptable. This is called an Addendum to the contract. It is a separate document but if signed by the parties, it becomes part of the entire agreement.
Consulting with an attorney during three (3) day review provides the buyer or seller an opportunity to better understand their agreement and address specific issues that might not otherwise be covered by the standard form contract.
For example, a person may enter into two contracts at the same time: one for the sale of their current property, and another for the purchase of a new property. In that case, it is important for that person to be protected in the event the sale of their current property falls through. They may not have the funds to close on the new property without the sale of the other. If this potential issue is not adequately addressed in the contract, they could be in breach of their obligations.
In cases where an agent is not involved, having an attorney prepare a contract may be helpful to keep the transaction on track and confront issues at the outset before they become a problem down the line.
In commercial real estate transactions, realtors may not use the standard form real estate contract. In this instance, an attorney may prepare the contract which may include provisions which are specific to the building and the businesses or tenancies operating on the site. There is no automatic three (3) day attorney review of these contracts because they are attorney prepared documents.
Land Use Issues in Real Estate Transactions
The intended use of a property under contract is an important consideration. The property may be purchased for your family, a loved one, or for investment purposes. It’s important to have a good understanding of that before you sign, because you do not want to be bound by a contract and then later discover that you are unable to use the land how you had planned.
In some cases, the parties may agree to a land use approval contingency in a contract. This permits a party to submit a land use application with the municipality or other government agency before closing on the property to determine whether the intended use or development is permitted. If they are denied, there should be an option to cancel the agreement. This type of clause may be included in any type of real estate contract.
Careful review and drafting of contracts can help clarify the positions of the parties and prevent avoidable disputes.
For more information on Standard Contacts Vs. Custom Contracts, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (609) 729-1333 today.