Options Before, During, And After A Sales Agreement

The sale of a house can be many things, from joyous to anxiety-ridden, but one thing it is not is guaranteed — at least not until all of the papers are signed at the closing. And, in between an offer to buy and the closing, there can be many stages or exceptions that might exist which can cause the whole deal to quickly evaporate. A licensed Realtor® is going to know and understand most of these exceptions and be able to help protect you. In this article we will look at some of these possibilities and explore what they mean for both the buyer and the seller.

When a seller puts their property on the real estate market for sale, often someone will come along that wants to buy that property. At that time the two parties (if they have reached an agreement on the price) will often enter into what is known as a sales agreement. This agreement is a sort of contract which states that the seller cannot offer the home to anyone else for the moment and that the buyer is committed to buying the home if they are financially able to do so.

The first item in that agreement is usually to write something into the contract that the whole deal is being based on the buyers current ability to pay for the home or their ability to secure financing via a loan or mortgage in order to pay for it. This is because, even though a buyer should be showing up with pre-approval from a lender if they don’t have the money on hand, even pre-approval doesn’t guarantee that they will be fully approved for a loan. So, this first contingency will protect the buyer from a lawsuit if their loan application is denied for some reason. If this contingency were included, and later was exercised by the buyer, it would also (normally) entitle them to a refund of any earnest money they may have put down already.

Another version of this item, if the buyer is a current home owner instead of a loan applicant, may make the sale contingent upon the buyer being able to sell their current home to pay for the new one. As usual, the exact conditions and wording will always depend on the particular situation. But if they were unable to sell their home within a reasonable time (whatever time-frame is stated in the agreement) then they would again have the right to back out of the deal and recoup their earnest money.

Now, that (often) first item in the contract also can protect the seller. If a deal is contingent upon a buyer selling their current home first, then the seller might waste months waiting for a deal that never comes. So, often something that balances out such a contingency is that the seller retains the right to accept offers from other interested buyers while the first buyer is arranging to sell their current home. The catch here is that, if such an agreement is reached, and the first buyer can sell their home within a reasonable time (whatever time-frame is stated in the agreement) then the first buyer has the right to buy the house regardless of other offers from other buyers. Though, depending on the contract, it might be arranged so that the seller can simply entertain offers from anyone, and if an offer comes along at a higher price than the original, the first buyer might have to either meet that offer or step aside. Everything just depends on the agreement that the first potential buyer is able to make with the seller.

The second item often wrote into the contract, also protecting the buyer, is some sort of wording that makes the whole deal contingent upon an inspection of the property by a licensed home inspector. This inspection will verify that any required disclosures made by the seller are accurate and that no other safety issues or other serious issues exist on the property. If this type of contingency is written into the agreement, and some serious safety issue or other damage is found that was not originally disclosed, then the buyer has both the right to back out of any agreement and to regain their earnest money in full. Again, the details of such an agreement are not universal and will depend solely on the actual contract made between the buyer and the seller.

There are other contingencies that may get included to protect the seller, such as the sale depending on a title search resulting in no liens or other financial interests outstanding against the property. Or, perhaps, the seller wants to include a “bump” clause, which might allow them any number of reasons to entertain and accept other offers at any time before closing. Again, everything that might appear in such a contract is discussed and agreed upon by both the buyer and the seller long before any paper is ever signed. And nothing is in effect until both parties have signed such a contract. The greatest protection in the world is that nobody has to sign anything that they don’t agree with. And nobody is under any obligation until they sign a contract.

The last thing we should cover is about the contract itself. Even with a contract in place, if both buyer and seller agree to some new terms or the changing of some current terms, then they can add something to the current contract that is usually called an addendum. This part of the contract is just the clarification or modification of current terms or the addition of new terms and, while the current contract is still a binding one, there are simply new or re-defined terms that are also now included.

Now, as I’ve stated a few times before, everything about any contract or agreement will always be unique to a particular situation. And only the parties involved can really settle on the exact terms that they may or may not like. This is why guidance from a licensed Realtor® is always a better option than trying to navigate such processes on your own. Having a professional to represent you and help you understand all of the details and options that might be (or should be) in a sales agreement is your best defense against falling victim to circumstance.