Components of a Strong Real Estate Contract

Legal Article

Components of a Strong Real Estate Contract

For those buying, selling, or leasing homes, real estate contracts can be the most important yet complex part of the transaction. Because there is a lot of stake in these transactions, there are many boxes you must check before closing the deal—which can make this inherently exciting process daunting.

Because of the complexity and stress associated with real estate contracts, preparing for and finalizing these contracts is no small feat. Further, understanding the composition of a real estate contract that is competitive, realistic, and protects your best interest can make or break the transaction. This article aims to give you the basics of real estate contracts and the important components of these contracts.

The Basics of a Real Estate Contract

A real estate contract is a legal document that states the terms and details of the real estate transaction. While there are multiple different types of real estate documents, the most common is a purchase agreement. The common purpose of a purchase agreement and other real estate contracts is to specifically state the expectations of both the real estate buyer and seller. Below is an outline of the three main steps one must take to create a valid real estate contract.

Step One

The buyer must have their real estate agent create an offer form that is then submitted to the seller who can accept or counter this offer. This offer form will contain a description of the parties and property in question, the purchase price, earnest money deposit amount, closing costs and who is responsible for them, and the proposed closing date.

Step Two

The seller will accept or counter this offer. If they choose to counter the offer, the seller must send back a counter offer to the buyer who can accept or counter that offer. In most cases, the counter offer will include modifications to the purchase price, closing costs, or contingency.

Step Three

Once the seller or buyer accepts the offer or counter offer, the contract is legally binding. When this occurs, both parties in the agreement must meet the terms and conditions of the contract. However, if the buyer or seller cannot meet all the terms of the contract, the agreement is voided.

Decoding a Real Estate Contract

Unless you have bought multiple homes or are a real estate investor, you may not know or be familiar with many of the terms included in real estate contracts. Below are the most common parts of real estate agreements.


The first and most important part of a real estate contract is the price. Furthermore, in most cases, the best and highest price will normally win the bidding—especially when there are multiple bids on the property. When dealing with price considerations, you should ask your real estate agent for comparative market analysis. This is beneficial as you can assess whether the property is priced at, above, or below the market value.


Another important part of real estate contracts is the timeline for obtaining the title, financing, and inspections. After both parties sign the initial real estate contract, the property must go through a home inspection. The home inspection strengthens the contract and helps both parties proceed to closing.

Other Components

Real Estate Taxes and Special Assessments

On the closing day, the seller should prorate property taxes and other costs such as fuel, maintenance fees, or homeowners association fees. As certain taxes are not known at the time of closing, the parties commonly use addendums. One important note is that the seller is responsible for paying any special assessment fees during or prior to the closing.

Items that are Included or Excluded

The purchase agreement must also state what items located on the property will be included or excluded from the sale. These include items that are not permanently affixed to a property such as.

  • Light fixtures
  • Heating and cooling equipment
  • Windows
  • Window treatments
  • Doors
  • Built-in kitchen appliances
  • Bathroom fixtures

Sellers are legally obligated to disclose any information that could affect the property value or safety.


Buyers and sellers may agree to a purchase agreement dependent on certain conditions that must be met before the property is sold. Below are a few of the most common contingencies buyers or sellers will request before signing a purchase agreement.


A home inspection is a critical part of every real estate transaction. While the buyer must pay for the inspection fee, they can choose whatever third-party they would like to do the inspection.


In addition to the inspection, the lender must carry out an appraisal. If the appraisal shows that the property value is lower than the seller is willing to sell the property for, the buyer must personally pay for the difference in price or negotiate the price lower. Additionally, the lender may require that the seller fix an issue on the property prior to closing.


In most cases, a buyer must pay a percentage of the property value to the seller upon closing while receiving the remaining balance from mortgage financing. Buyers usually obtain financing prior to closing. However, buyers can include a financing contingency that allows them to break the purchase agreement if their financing falls through.


The seller must show that they obtain the title of the property before closing. This ensures that buyers will obtain the property title upon closing.

Delivery, Acceptance Date, and Offer Expiration

Both the buyer and seller should know when the purchase agreement expires if neither party accepts the deal. Additionally, the agreement should state how long the party making the offer has to withdraw the agreement without penalty.

Another point to include is that if both parties accept the agreement, they must communicate this acceptance.

Final Thoughts

With over 20 years of experience, Antonoplos & Associates real estate attorneys have the knowledge and experience required to assist clients with real estate litigation in DC, Maryland, and Virginia. Furthermore, our attorneys have a strong background in real estate, construction law, and business law. Because of this experience, we are can assist clients with most aspects of real estate litigation. Finally, we are able to help you before, during, and after your real estate litigation. This is true whether you need assistance with personal or commercial legal issues.

Contact Our DC Law Office for More Information

Finally, for more information on components of a strong real estate contract, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding real estate law, check out our blog.