Real estate contracts are typically very dense documents. They include information about the property and the obligations of both parties involved in the transaction. The person who wants to buy the property submits a written purchase offer that the seller evaluates and potentially counters.
The final contract drawn up with respect to the transaction manages the process of transferring ownership to the buyer. Unfortunately, sometimes contract disputes arise and create challenges for those attempting to buy or sell real estate. The following are some of the most common sources of contract disputes that may arise during a real estate transaction.
Contingencies and cancellations
Buyers frequently include contingencies in their offers that allow for the cancellation of the purchase. Situations involving financing issues, low appraisals or inspection concerns might lead to a buyer canceling the scheduled closing. In theory, the contingencies they included in their offer could protect them from the loss of their earnest money. In practice, sellers may fight back and try to claim that the situation does not justify a cancellation in the hopes of retaining the earnest money.
Few things are more upsetting for a new property owner than discovering that the seller lied about the condition of the property. Technically, state law requires thorough disclosure of all known defects, including latent defects that people might overlook when inspecting the property. Buyers sometimes need to take the sellers to court when they have not been honest about issues with the property. Even houses listed in as-is condition still require a thorough seller’s disclosure.
Post-closing occupancy issues
A lack of inventory and a competitive market make it difficult for someone who has sold their home to find another house quickly. Sellers sometimes rush to the closing table, only to realize that they have nowhere to go. Buyers may become frustrated when a seller does not vacate the property by their possession date. They may end up going to court to enforce a post-closing occupancy agreement that requires the seller to pay a per diem rate for remaining at the property. They may also need to evict the seller in some cases.
Understanding some of the more common sources of real estate contract disputes may help people negotiate more effective contracts when buying or selling real property.