Frequently Asked Questions about Property Sales Contracts
Q. Who is involved in a real estate transaction?
A. Although it’s possible for a home to be bought and sold strictly between principals the buyer and seller this rarely happens today. Usually, a homebuyer will want to use the services of a real estate agent, an attorney, and a home inspector to check out the property. To obtain financing, homebuyers will consult the staff of one or more lending institutions. They also may consult with a financial planner or accountant about financing and an insurance agent to obtain homeowner’s insurance. While some sellers choose to sell their home without the services of a real estate agent, few would forego the services of an attorney once an purchase offer has been made. The seller also may turn to a financial planner or accountant for assistance in sorting out the tax consequences of selling.
Q. What is the real estate agent’s role in a home sale?
A. Typically, two real estate agents are involved in the sale of the home–the listing agent, with whom the seller lists the property, and the agent who shows the property to prospective buyers.
For the buyer, it is important to keep in mind that both the listing agent and the agent showing properties are agents for seller. This means that both of these individuals work for and on behalf of the seller, not for the buyer. For a prospective buyer, this is an absolutely crucial point. It means, for example, that neither the listing agent nor the showing agent is permitted to disclose negative information to a buyer about the property, that is, information that is adverse to the seller’s interest in selling the property.
As a buyer, you can avoid this information gap by hiring a buyer’s agent. Because this
individual represents you as the buyer, he or she will be required to disclose to you all relevant information–the bad as well as the good–about the property you are considering. In addition, a buyer’s agent is there to negotiate the best possible purchase terms for you. A buyer’s agent can be compensated from the total commission generated by a sale. Because this is an area of law that is rapidly changing, it is important for the buyer to have a knowledgeable attorney.
Q. What is the role of the seller’s agents?
A. The seller’s listing agent helps determine the price of the home, suggests how to market the home, schedules advertising and open houses, shows the home to prospective buyers, and
otherwise facilitates the sale. The showing agent works with buyers to show homes, contacts the listing agents, monitors the transaction, and, perhaps, helps to obtain financing. In most cases, the seller pays the sales commission, which is shared by the two agents.
Q. When should I see an attorney about buying or selling a home?
A. It probably isn’t necessary to consult a lawyer when you begin your search for a home. If you are a buyer, you probably will want your attorney to enter the process when you are ready to make an offer and, certainly, before you sign an offer to purchase. If you are a seller, you probably will want to consult an attorney early in the process and before signing a listing agreement with a real estate agent.
Buying and selling real estate almost always entails a contract. So, keep in mind that a5
typed or handwritten “letter or agreement” or “letter of understanding” signed by the parties will be binding if it meets the legal requirements of a contract. Don’t sign something assuming it’s not a contract and, therefore, not important. If something goes wrong, you don’t want to discover too late that you’ve signed away important rights, failed to include important protections, or failed to receive what you expected. And beware of making oral promises. Many kinds of contracts don’t have to be in writing to be valid. For example, if a seller verbally promised to update the electrical system, the buyer might be able to insist that the system be updated even if the matter doesn’t arise in later negotiations. Legal advice will be much more helpful and less expensive before rather than after signing a purchase contract.