Tennessee Real Estate Contract: Different Types and Key Terms to Include

What is a Tennessee Real Estate Contract?

A Tennessee real estate contract, also called a residential purchase and sale agreement, is a legally binding contract executed between a buyer and a seller for the purchase of real estate.

A real estate contract is created when a potential buyer makes an offer on a seller’s listing. If the seller accepts the buyer’s offer, the parties will negotiate the terms of the contract to move forward with the sale. Once satisfied with all terms and conditions, the parties will sign the contract making it legally binding and enforceable.

Common Tennessee Real Estate Contracts

The most common Tennessee real estate contract is a residential purchase and sale agreement. This agreement is used for buying and selling residential property like homes or property on which a home can be built.

Real estate agents use contract templates to facilitate the sale because unlike lawyers, real estate agents cannot draft their own contracts.

There are two regularly used contract templates in Tennessee:

• Memphis Area Association of Realtors contract. A contract template form created and approved by the Memphis Area Association of Realtors. This contract can only be used with conventional financing.
• Tennessee Association of Realtors contract. A contract template form for use by a realtor who belongs to the Tennessee Association of Realtors.

4 Essential Elements of a Tennessee Real Estate Contract

For a real estate contract to be valid in Tennessee, it needs to include 4 essential elements. These elements are:

1. Mutual assent
2. Offer and acceptance
3. Adequate consideration
4. Legality

What Must Be Included in a Tennessee Real Estate Contract?

A Tennessee real estate contract can be a lengthy document because it needs to include specific information to complete the sale. A real estate contract should include the following essential information:

• Purchase price. The agreed upon amount the buyer has promised to pay the seller in exchange for the property title.
• Closing date. The date that the sale is finalized and payment must be made for the property.
• Earnest money deposit. The deposit made by the buyer to show the seller they are committed to purchasing the property.
• Contingencies. Conditions that must be met by either the buyer or the seller to complete the deal. Common contingencies include the buyer selling their previous home, the buyer obtaining financing and insurance, or the home passing a home inspection.
• Disclosure requirements. Disclosures are any negative conditions or property defects that the seller must reveal to the buyer before closing the sale.

Under Tennessee law, buyers are entitled to a Residential Property Condition Disclosure before finalizing the sale of the property. Buyers can also choose to waive this right and purchase the property “as is” by filling out a Waiver of Property Condition Disclosure. If a buyer purchases a home “as is”, they are accepting responsibility for any defects or repairs that may need to be made.

Who Binds a Real Estate Contract in Tennessee?

In Tennessee, the listing agent will bind the offer. The contract becomes binding once the broker receives the receipt of acceptance of the buyer’s offer and signs off on the binding agreement information. This is typically done on the original real estate contract but can also be completed on the final counter offer form.

The following is an example timeline of the binding process:

1. The buyer makes and offer that is submitted to the listing agent.
2. The seller either counters the offer or accepts the offer.
3. Once the offer is accepted, the selling agent submits the accepted offer to the listing agent.
4. The listing agent binds the offer as the last party to receive the acceptance of the offer.