The Contract of Sale
Once the parties agree on the general terms, the seller’s attorney prepares a contract of sale. This is the most critical part of a real estate transaction. If a promise by a party regarding any aspect of the transaction is not contained in the signed contract of sale, that promise will not be enforceable. For example, if a seller and purchaser verbally agreed to include certain furniture or to repair certain defects as part of the sale, but did not include those promises in the contract, the purchaser has no recourse if the seller refuses to live up to those promises.
Although most attorneys use standard forms for Contracts of Sale, it is common to modify and edit those forms. In addition, both seller’s and purchaser’s attorneys often add more terms than those contained in the Contract of Sale with the use of an addendum known as a “rider”. It is the responsibility of each attorney to ensure their client is properly protected should in case something goes wrong. For that reason, the wording of the Contract of Sale and the riders must be carefully reviewed. Rarely is the final Contract of Sale identical to the initial one drafted by the seller’s attorney.
Once all Contract terms are mutually agreeable, the Contract of Sale is signed by the seller and purchaser and the contract deposit provided to the escrow agent, the property is officially “in contract”. Depending upon local custom, the escrow agent may be either the the seller’s attorney or a title agent. If the transaction involves mortgage financing, the purchaser will submit a copy of the Contract of Sale with their loan application to a lender. If the sale involves a coop, a copy will also be submitted with other required information to the coop board for approval of the sale.