Sign all real estate contract documents

1. Determine your home's value in today's marketplace
2. Find out what is currently available for sale in your area or neighborhood
3. Estimate the proceeds from selling your home
4. Determine what needs to be repaired or upgraded before you sell
5. Make necessary repairs – find qualified contractors
6. What's the best way to sell your home?
7. Decide whether and how to use an agent or sell your home yourself
8. Determine your sales price
9. Sign a listing agreement with a real estate agent
10. Create a proactive home marketing plan
11. How to handle showing your house to potential buyers
12. Get showing feedback
13. Provide property disclosures
14. Continue home marketing efforts & price adjustments
15. How to negotiate home selling price upon receiving an offer
16. Sign all real estate contract documents
17. Order title insurance commitment
18. The mortgage application process: track the buyer's progress
19. The home inspection process
20. The title process & closing the sale of your home

A real estate contract is not complete until all parties have signed

This may seem insignificant, but the contract to sell a home is not a completed contract until all parties (seller, seller's real estate agent where applicable, buyer and buyer's real estate agent) have signed the document(s). Every page of the contract should be initialed by both buyer and seller (to indicate that they have read and understand each page). All other attachments and disclosures should also be signed by all parties, or as required in your state.

Addendums, attachments to the contract

Many states require additional documents, including property disclosures, square footage disclosures and lead-based paint disclosures, among others. You may need to check with your state's real estate commission to determine which additional documents are needed. All of these documents must be signed and dated and bundled with the contract to make an entire contract package.

 

Here is a link to a sample lead-based paint disclosure form from the US Department of Housing and Urban Development. (You will need Adobe Acrobat Reader to view this document).

 

Earnest money deposit

Essentially there are five components to any "valid contract" in the United States.

They include:

1. Competent parties of sound mind, legal age, and not under the influence of alcohol or drugs, etc.
2. Legal Purpose. That is, the purpose of the contract must be legal.
3. Voluntary. The contract must be entered into voluntarily and not "under duress."
4. "Meeting of the Minds," meaning that both parties must have reached a mutual understanding of the nature, purpose, and terms of their agreement.
5. "Consideration," in that there must be "something of value" exchanged between the parties that serves to signify their intent to act in "good faith" and complete their mutual obligations in order to consummate their agreement. While legal consideration can include a "promise" to act – or refrain from acting – in some manner with regard to most contracts, real estate law requires that real estate contracts be in writing.

The earnest money deposit serves as evidence of the "consideration" exchanged between parties to a valid, written, real estate contract. In most cases, the earnest money deposit is refundable should the potential purchaser decide not to go through with the agreement based on some legitimate contingency, such as failure to obtain necessary financing, refused inspection correction items, an appraisal below the sales price, or any other contracted contingency. In other cases, the earnest money may not be refundable depending upon the agreed-upon terms as discussed in the "Meeting of the Minds" component to a valid contract above.

 

The earnest money deposit is typically held by the closing or escrow agent until closing. Those funds become a part of the buyer's down payment at closing. In some cases, the real estate brokerage may hold the earnest money deposit. Typically, the seller does not hold the earnest money deposit.

 

Closing instructions

As referenced elsewhere in this document, closing instructions inform the title or escrow company about the transaction and authorize them to close the transaction based upon those specific instructions. Closing instructions are a part of the "contract package", and are generally signed by all parties (buyer's agent (if applicable), buyer, seller's agent (if applicable) and seller).

 

Get a copy of the entire real estate contract package to each party

Make copies of all documents and forward to the closing or escrow agent (usually a title company or attorney's office). Get one copy of all documents to each party (buyer, buyer's agent, buyer's lender, seller, seller's agent). Finally, deliver a copy of the entire contract package to the title company or escrow agent (which may be attorney's office, depending on the procedures in your state).

 

Deliver to title company or escrow agent

The title company or closing escrow agent will need a full "contract package", including signed contract, addendums and disclosure forms; the closing instructions; and the earnest money deposit (if that is being held by the title or escrow company). Once the entire file and earnest money deposit is delivered to the title company or escrow agent, the closing process begins. Next Step: Order title insurance commitment