Real Estate Contracts and Transactions
The Real Estate Contracts and Transactions domain tests whether a sale or option agreement is enforceable, what conditions must occur before closing, and what remedies follow breach. Expect statute-of-frauds, contingency, deposit, and specific-performance issues.
Formation and statute of frauds
A land sale contract requires offer, acceptance, consideration, capacity, and legality. The statute of frauds requires a writing signed by the party to be charged that identifies the parties, property, and price or formula. Electronic signatures generally suffice. An option keeps an offer open; exercise creates the sale contract. A right of first refusal requires the owner to offer the holder matching terms before selling to a third party.
Purchase terms and contingencies
The agreement should state the legal description, price, earnest money, title and survey review, financing, appraisal, inspection, closing date, possession, risk of loss, and prorations. A financing contingency is a condition precedent: if the buyer makes a good-faith application and cannot obtain the specified loan, the buyer may cancel and recover the deposit. Waiving it makes performance unconditional. Time-of-the-essence clauses make deadlines enforceable. A liquidated-damages deposit must reasonably forecast loss, not penalize breach.
Remedies
Because land is unique, specific performance is available. Sellers may retain a reasonable deposit or sue for damages; buyers may seek rescission or damages. Equitable conversion can shift risk of loss to the buyer once signed, depending on state law and the contract. “As-is” does not waive fraud or statutory disclosure duties.
Worked example
Buyer deposits $20,000, and closing is conditioned on a 6% loan. Buyer applies to three lenders but receives only 7.5% offers and cancels. The exact financing condition failed after good-faith efforts, so the deposit is refundable. Had Buyer waived financing and failed to close, Seller could keep the deposit only if it is a valid liquidated-damages amount.
Traps
An unsigned draft does not bind the party who did not sign. Contingency deadlines are enforceable. Labeling a deposit “nonrefundable” does not make it a penalty-proof liquidated-damages clause.