What Is a Real Estate Contract Review?
A real estate contract review is the process of reviewing a real estate contract. This legal document between a seller and buyer outlines a real estate transaction. For example, when you buy a property, you sign a real estate contract or purchase agreement to complete the sale.
A legally sound real estate contract outlines the responsibilities and rights of buyers and sellers, and it can advise about duties and obligations between parties.
Reviewing your real estate contract before signing is always a wise choice. Using a lawyer’s expert knowledge, you can ensure your document covers all the necessary conditions while offering adequate protection.
Here is an article with more information about real estate contract conditions.
Common Real Estate Contracts
Different types of real estate contracts depend on the property being sold.
1. Commercial Real Estate Purchase Agreement
When purchasing a commercial property, there are distinct responsibilities and requirements that a buyer agrees to take on. Commercial properties include:
- Apartment complexes
- Retail spaces
- Industrial sites
- Multifamily homes that hold more than five units
In some cases, a commercial property buyer may also acquire a commercial lease of a business tenant. In these circumstances, the buyer becomes responsible for managing and maintaining all the leases on their premises.
There are also specialized management, unique risks, and possibly legal requirements for commercial buyers that residential buyers do not have.
2. Residential Real Estate Purchase Agreement
Whether a property is for sale by the owner or listed by a realtor, the buyer will sign a real estate contract before they close any sale with the seller.
A residential real estate contract review helps assure you are given the best deal and a fair price without taking on any hidden risks. Financing terms and home inspection are the most important conditions when buying a residential property.
3. Contracts for Deed
In this contract, the buyer acquires land they will pay for in installments. Upon signing a contract for deed, the buyer assumes possession of the land. However, the seller maintains the full title until the total cost is paid.
The financing terms will be negotiated between the buyer, seller, or broker. Negotiations will include contingencies, like deposit amounts and a payment schedule.
4. Lease Agreements
A lease agreement allows a tenant to pay a landlord for a fixed amount of time to live in or use their property. Lease agreements are standard in both residential and commercial real estate.
While it does not involve a sale, a contract review is still beneficial for people taking on a lease, especially if they are unclear on any of the terms and conditions, or the rights outlined in the document.
5. Power of Attorney Contracts
Power of attorney (POA) contracts grant someone the right to sell another person’s property on their behalf. The POA can be given to a person you trust, such as a family member or your attorney.
Many people who no longer wish to manage their estate will transfer power of attorney to their lawyer, overseeing its sale.
Here is an article with a detailed explanation of different types of real estate contracts and transactions.
Should an Attorney Review My Real Estate Contract?
Most real estate contracts involve a lawyer on both sides. Therefore, it is highly recommended that you enlist an attorney’s services to review your agreement.
In many states, a lawyer must draw up a contract to be legally valid. However, some states permit brokers or realtors cannot write contracts or perform real estate contract reviews.
Working with a lawyer in your state will ensure that all the conditions in your real estate contract comply with federal, state, and local real estate laws.
Attorneys can also help you negotiate better terms in a contract if you realize some of them do not meet your needs. They can perform tasks such as:
- Comprehensively reviewing the contract
- Making suggestions to amend the real estate contract for a fairer deal
- Clarifying any points of confusion or concern
- Searching for liens against the property
- Ensuring that all changes are correctly implemented before signing
- Reviewing and managing all closing documentation
Here is an article with more information about when to work with a real estate attorney.
What Should You Look for in a Real Estate Contract?
Some terms you should always look for in a real estate contract include:
- Financing terms. The contract should detail how you will pay for the home, including your mortgage, down payment, and interest rate. If you make an offer for an interest rate you are not approved for in your offer, the seller will be allowed to keep your earnest money deposit if you back out of the sale.
- Closing costs. The document should detail who will manage the closing costs and any brokerage fees associated with the transaction. In addition, the contact should state how much each party will pay in dollar amounts, e.g., $10,000.
- A breakdown of fee responsibilities. How much do the buyer and seller pay for escrow fees, realtor fees, tax, title insurance, and so on? These terms are often negotiated at large before signing a contract, and their exact distribution should be clear in the document.
- Home inspection terms. There should always be a home inspection contingency that allows the buyer to withdraw their offer and have their earnest money returned under certain conditions. Common home inspection contingencies include mold growth, foundation problems, pests, and radon.
- Fixtures, appliances, and furniture.The document should say so if light fixtures, windows, doors, and domestic appliances are not included in the final sale. However, suppose the owner is including any of their furniture in the property sale. In that case, they must provide a list of the belongings and their value. This value should be factored into the final price of the house.
- The closing date. It typically takes between 30 and 60 days to close a deal on the house. Any issues that happen during this time can affect the final result; certain contingencies can be incorporated into the contract that allows the buyer or seller to cancel the transaction under certain conditions
While these are the most common real estate conditions, your document may include other factors that are relevant to your situation. The best way to ensure you are fully protected during the sale process is by having an attorney conduct a real estate contract review.
Here is an article with details on residential real estate costs.
How Much Does It Cost to Review a Real Estate Contract?
According to ContractsCounsel’s marketplace, the average cost to review a real estate contract is $608.97. A real estate lawyer’s rates will vary, and the complexity of a contract can incur additional charges.
This is the most common rate for a comprehensive review of your contract, including terms, conditions, contingencies, and closing costs.
Here is an article with more information about the average cost of a real estate contract review.
How Long Does It Take to Review a Real Estate Contract?
It will take between 2 and 3 hours for a lawyer to review your real estate contract thoroughly. The exact times can vary based on the type of sale and details surrounding the transaction.
The attorney review period after signing a contract is three to five days.
You will also need to go over the reviewed document with your broker or realtor and the seller and their representatives. Negotiations can extend the review period if you make amendments to your original contract.
Here is an article about when you need a lawyer to buy a house.
What Should I Ask for in My Real Estate Contract?
In any real estate contract, you should negotiate the conditions until they feel fair to you. It is within your legal rights to ask for contingencies that protect your investments; this includes the option to withdraw from an offer within a certain period of time.
If you are unsure what to ask for in a contract, speaking with a real estate attorney can help you establish a list of needs and priorities for your next transaction.
Here is an article with seven details to always look for in a real estate purchase agreement.
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