If you’re buying or selling a property, you’ll encounter a contract at some point in the transaction. Defining expectations from the buyer and seller, these legal documents can help each party avoid surprises—as well as lay the foundation for legal action if certain expectations aren’t met.  If you’re planning on making a real estate transaction, here are a few contract terms to know.  

5 Real Estate Contracts Terms Defined

1. Earnest Money

Earnest money refers to a specific amount of money that the buyer must deposit to show they are serious about purchasing a home. If the deal goes through, these funds are applied to the closing costs. If the deal doesn’t go through, the funds will either be given to the buyer or the seller depending on which party is at fault.

2. Effective Date

Real estate transactions involve several important deadlines—such as those regarding home inspections. The effective date marks the beginning of these periods to determine exactly when the deadlines must be met.

3. Contingencies

Contracts typically feature many different contingencies—provisions that allow a party to back out if unforeseen circumstances take place. Buyers, for instance, may be able to void the contract and receive earnest money if their home inspection contingencies aren’t met. Sellers might also have a contingency that would cancel the contract if they are unable to find a home to move into by a certain date.

4. Disclosures

Sellers must include disclosures about the property’s condition that may impact the value of the home. For example, they must acknowledge unresolved plumbing problems, prior mold issues, or the presence of lead-based paint. Legally, these issues must only be disclosed if the seller is aware of them. Intentionally omitting known disclosures could be considered fraud.

5. Kick-Out Clause

A kick-out clause is often included in real estate contracts to prevent lengthy home sales. It’s typically used when the buyer has to sell a previous home before they can move on with the transaction. The kick-out clause states how long the buyer has to sell their home before the sellers can release the contract and seek out new buyers.

If you’re having issues with a contract, reach out to Stuart R. Norman, Jr. in Griswold, CT. Serving New London County for more than four decades, this experienced real estate attorney is well-versed in both property and contract laws. Whether you need help creating a contract or need to take action against a breach, you can count on him to deliver dependable support and protect your rights. To learn more about these legal services, go online or call the office at (860) 376-0069.