Real estate contracts can be complex documents containing various clauses and legal jargon. One of the most important clauses in a real estate contract is the “under contract” clause. This clause outlines the conditions that must be met before the sale of a property is finalized. It is important for buyers and sellers to understand this clause in order to avoid any confusion or legal disputes during the buying or selling process. In this article, we will break down the under contract clause in real estate contracts and explain its significance.
Real estate contracts are legally binding agreements between buyers and sellers that outline the terms and conditions of a property sale. One important clause in these contracts is the under contract clause.
What is the Under Contract Clause?
The under contract clause is a provision in a real estate contract that indicates when the property is officially under contract. It is typically found in the purchase agreement and often includes a specific timeframe for the buyer to complete inspections and finalize financing.
When a property is under contract, it means that the seller has accepted an offer from a buyer and both parties have signed the agreement. During this time, the property is temporarily taken off the market, and the buyer typically has a certain amount of time to complete any inspections and finalize financing before the sale is completed.
Breaking Down the Under Contract Clause
The under contract clause may include several provisions that both the buyer and seller must adhere to. Here are some of the most common elements of this clause:
1. Inspection Contingency
An inspection contingency allows the buyer to have the property inspected by a professional inspector to identify any potential problems or issues. If the inspection reveals any significant problems, the buyer can request that the seller make repairs or reduce the purchase price.
2. Financing Contingency
A financing contingency allows the buyer to obtain financing for the purchase of the property. If the buyer is unable to secure financing, they can back out of the contract without penalty.
3. Timeframe
The under contract clause typically includes a timeframe for the buyer to complete inspections and finalize financing. This timeframe can vary depending on the terms of the contract but is usually between 30 and 60 days.
4. Earnest Money
Earnest money is a deposit made by the buyer to show their commitment to the purchase of the property. If the buyer decides to back out of the contract without a valid reason, they may forfeit their earnest money to the seller.
Conclusion
The under contract clause is an important provision in real estate contracts that outlines the terms and conditions of a property sale. It protects both the buyer and seller and ensures that the sale is completed in a timely and efficient manner. If you are buying or selling a property, it is important to understand the under contract clause and all of its provisions.
