Contracts, Agreements and Transaction Documents
Formation and writing
Real estate contracts must satisfy the statute of frauds, so the essential terms must be in writing and signed by the party to be charged. Essential terms include parties, property description, price, and intent to be bound. Electronic signatures are generally valid. A listing agreement, buyer agency agreement, purchase and sale agreement, lease, option, and right of first refusal are all contracts with distinct terms.
Offer, counteroffer, and acceptance
An offer creates power of acceptance. A counteroffer rejects the original offer and creates a new one, so the original offeree cannot later accept the first offer unless it is revived. Acceptance must be communicated according to the contract terms. Earnest money is consideration and is usually held in escrow; disputes over its release are resolved by the contract's dispute provisions, not by the agent's preference.
Contingencies and remedies
Inspection, financing, appraisal, and sale-of-home contingencies must be waived or satisfied in writing by stated deadlines. Time is of the essence when the contract says so. Remedies may include return of earnest money, damages, or specific performance. Common traps: treating a counteroffer as an acceptance, missing a contingency deadline, assuming oral modifications are effective, and confusing an option with a contract to buy.
Worked example: Buyer offers $400,000. Seller responds in writing at $415,000. Buyer then says he accepts the original $400,000. There is no contract because the counteroffer rejected the original offer; the buyer must accept the $415,000 counter or make a new offer.