The Complete Guide to Contracts of Sale in Real Estate

Discover the essentials of a contract of sale in real estate. Learn key components, steps, and FAQs in our comprehensive guide.


A contract of sale in real estate is a legal agreement defining the terms and conditions of a property transaction between a buyer and seller.

Here’s why it’s crucial:

  • Legal Binding: This contract sets the deal in stone, ensuring both parties adhere to their agreed obligations.
  • Clarity: It lays out detailed terms, covering price, property specifics, and timelines, preventing misunderstandings.
  • Protection: Safeguards against potential issues by stipulating contingencies, disclosures, and remedies for breaches.

Whether you’re buying a new home or selling an investment property, understanding this contract helps ensure a smooth transaction.

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What is a Contract of Sale in Real Estate?

A contract of sale in real estate is a legally binding agreement between a buyer and a seller. This contract outlines the terms and conditions under which a property will be sold. It’s also known as a real estate sales contract or a purchase agreement.


At its core, a contract of sale is a detailed document that specifies every aspect of the property transaction. It includes information about the property, the agreed-upon price, and the responsibilities of both parties. Once signed, it becomes legally enforceable, meaning both the buyer and seller must adhere to its terms.

Real Estate Sales Contract

A real estate sales contract is synonymous with a purchase agreement. It covers:

  • Buyer and Seller Information: Full names and contact details of the parties involved.
  • Property Details: Exact address and description of the property.
  • Purchase Price: The agreed selling price, including any deposits or additional costs.

For example, when MP Benecia Logistics, LLC sold the Benecia Logistics Center to Bebe Studio Realty, Inc., the contract detailed the property specifics, the purchase price of $18,000,000, and other crucial terms .

Binding Agreement

When both parties sign the contract, it becomes a binding agreement. This means:

  • Commitment: Both the buyer and the seller are committed to fulfilling their obligations.
  • Legal Consequences: Failing to adhere to the contract can lead to legal consequences, such as lawsuits or financial penalties.

For instance, the Florida Realtors/Florida Bar contracts are binding and use calendar days to calculate time periods. If a deadline falls on a weekend or holiday, it extends to the next business day .

Importance of a Purchase Agreement

A well-drafted purchase agreement is essential because it:

  • Ensures Clarity: Clearly outlines the terms, reducing the risk of misunderstandings.
  • Provides Protection: Includes contingencies and disclosures to protect both parties.
  • Facilitates Smooth Transactions: By setting clear expectations, it helps ensure the transaction proceeds smoothly.

In summary, a contract of sale in real estate is a vital document that safeguards the interests of both buyers and sellers, ensuring a transparent and legally sound property transaction.

Key Components of a Real Estate Sales Contract

When entering into a contract of sale in real estate, several critical components must be clearly defined to ensure the legality and clarity of the contract. Here’s a breakdown of these essential elements:

Buyer and Seller Information

This section includes the full names and contact information for all buyers and sellers involved in the transaction. It’s crucial to have accurate details to avoid any legal issues later.

Property Details

This part of the contract describes the property being sold. It includes the address, a detailed description of the property, and any other pertinent details. Clear property details help prevent misunderstandings about what exactly is being bought.

Purchase Price

The purchase price is the cornerstone of the real estate sales contract. It should clearly state the total price and how it will be paid, including the down payment and any financing details.

Representations and Warranties

Representations and warranties provide assurances from both parties about certain conditions of the property and the transaction. For example, the seller might warrant that the property is free of liens, while the buyer might represent their financial ability to complete the purchase.


This section outlines the details of how the buyer will finance the purchase. It includes information about mortgage loans and any other financing arrangements.

Fixtures and Appliances

If you want specific items like the refrigerator, dishwasher, or washing machine to be included in the sale, this must be clearly stated in the contract. Don’t rely on verbal agreements.

Title Insurance

Title insurance protects the buyer and lender from any claims or disputes over the property’s ownership. The contract should specify who will pay for this insurance and what kind of coverage will be provided.

Property Taxes

This section details how property taxes will be handled. Typically, taxes are prorated based on the closing date, ensuring each party pays their fair share.

Closing Date

The closing date is when the transaction is finalized, and the property officially changes hands. This date needs to be clearly specified to ensure all parties are prepared.


Contingencies are conditions that must be met for the transaction to proceed. Common contingencies include:

  • Home Inspection: Allows the buyer to verify the property’s condition.
  • Financing: Ensures the buyer can secure a loan.
  • Appraisal: The property must appraise for a certain amount.

These clauses provide a safety net for both parties, allowing either to back out under specific circumstances without financial penalty.

Earnest Money

Earnest money is a deposit made by the buyer to show serious intent to complete the purchase. It’s typically held in an escrow account and applied to the purchase price at closing. The amount and conditions for refund should be explicitly stated.

Option to Terminate

This clause allows either party to terminate the contract under certain conditions. For example, if the buyer cannot secure financing, they might have the option to terminate the contract without penalty.

Lead-Based Paint Disclosure

For homes built before 1978, a Lead-Based Paint Disclosure is required by federal law. This disclosure informs the buyer of any known lead-based paint on the property, which is crucial for health and safety reasons.


Finally, the contract must be signed by all parties involved to be legally binding. This includes the buyer, seller, and any agents or attorneys representing them.

Understanding these components in a real estate sales contract not only helps in making informed decisions but also ensures that both parties are protected throughout the transaction process. Next, we’ll explore the steps to writing a contract of sale for real estate, ensuring you know how to get started.

Steps to Writing a Contract of Sale for Real Estate

Creating a contract of sale real estate might seem complicated, but breaking it down into manageable steps can make the process straightforward. Here’s a guide to help you through each critical step.

Identify Parties

1. Start with the Basics:
– Clearly identify the buyer and seller.
– Include full names and contact information for each party.
– Specify any agents or attorneys involved.

“John Doe, Buyer, and Jane Smith, Seller, agree to the terms outlined in this contract.”

Detail Price and Terms

2. Specify the Purchase Price:
– Clearly state the agreed-upon purchase price.
– Outline any deposits or additional costs.

3. Define Payment Terms:
– Indicate how the payment will be made (e.g., cash, financing).
– Include details about any earnest money deposits.

“The purchase price for the property is $250,000, with an earnest money deposit of $5,000.”

Set Closing Date

4. Establish a Closing Date:
– Agree on a specific date for closing the transaction.
– Ensure the date allows enough time for all necessary inspections, appraisals, and financing.

“The closing date for this transaction will be June 30, 2024.”

Establish Costs, Taxes, and Responsibilities

5. Allocate Closing Costs:
– Specify who pays for each cost, such as escrow fees, title insurance, and recording fees.
– Consult your real estate agent to understand local customs for cost allocation.

6. Address Property Taxes:
– Determine how property taxes will be prorated between the buyer and seller.

7. Outline Responsibilities:
– Detail responsibilities for any repairs or inspections before closing.
– Include any agreements on fixtures and appliances.

“The seller will pay for the title insurance premium, while the buyer will cover all recording charges.”

8. Include Contingencies:
– Add any necessary contingencies, such as financing, inspection, or appraisal contingencies.
– Clearly state the conditions under which the buyer or seller can withdraw from the contract.

“This contract is contingent upon the buyer obtaining financing within 30 days of the contract date.”

By following these steps, you ensure that your contract of sale real estate is thorough and legally binding. Next, we’ll dive into common contingencies in real estate contracts, helping you understand how to protect your interests during the transaction.

Common Contingencies in Real Estate Contracts

When buying or selling a home, contingencies are like safety nets. They protect both parties if certain conditions aren’t met. Here are the most common contingencies you’ll encounter in a contract of sale real estate:

Inspection Contingency

An inspection contingency lets the buyer hire professionals to inspect the property for any issues. Imagine finding out the home needs a new roof after you’ve moved in—that’s a huge expense! This contingency allows the buyer to:

  • Request repairs
  • Renegotiate the purchase price
  • Withdraw from the sale without penalty if significant issues are found

This clause ensures that buyers aren’t stuck with a money pit.

Appraisal Contingency

The appraisal contingency ensures the home’s appraised value is equal to or higher than the agreed-upon purchase price. If the home appraises for less, the buyer can:

  • Renegotiate the price
  • Walk away from the deal

This protects buyers from overpaying and lenders from lending too much on an undervalued property.

Financing Contingency

A financing contingency is crucial if the buyer needs a mortgage. It states that the purchase is dependent on the buyer securing financing. If the buyer can’t get a mortgage, they can:

  • Cancel the contract
  • Get their earnest money deposit back

This contingency is vital for buyers who are not paying in cash.

Title Contingency

A title contingency involves a title report that ensures the property has no liens or legal issues. If problems are found, the buyer can:

  • Ask the seller to resolve the issues
  • Withdraw from the sale

This protects the buyer from future legal troubles related to the property’s ownership.

Home Sale Contingency

A home sale contingency is like insurance for buyers who need to sell their current home first. It states that the purchase of the new home depends on selling their existing home. If the buyer can’t sell their home, they can:

  • Cancel the contract
  • Get their earnest money deposit back

This contingency prevents buyers from owning two homes at once or being stuck with an unsold property.

Understanding these contingencies helps you navigate the real estate process with confidence. Next, let’s explore the due diligence period and why it’s essential in a contract of sale real estate.

Understanding the Due Diligence Period

The due diligence period is crucial in a contract of sale real estate. It allows the buyer to thoroughly inspect the property and review all relevant documents before finalizing the purchase. Let’s break down what this entails:

Due Diligence Items

During this period, the buyer examines various aspects of the property. These items often include:

  • Title and survey matters
  • Leases and service contracts
  • Physical and environmental conditions
  • Compliance with laws and regulations

The goal is to uncover any potential issues that could affect the property’s value or usability.


Buyers conduct several types of investigations to ensure the property meets their expectations:

  • Property inspections: Professionals check for structural issues, pests, or other problems.
  • Environmental assessments: Tests for hazardous materials like asbestos or lead paint.
  • Compliance reviews: Ensures the property adheres to local zoning laws and building codes.

These investigations help buyers make informed decisions about proceeding with the purchase.

Access to Property

During the due diligence period, the seller must provide reasonable access to the property. This usually happens during ordinary business hours and requires advance notice. The seller must also make available relevant documents at a specified location, often the property manager’s office.


Buyers must comply with all applicable laws during their investigations. This includes:

  • Repairing any damage caused by inspections
  • Fulfilling legal requirements for environmental and safety standards
  • Allowing the seller’s representative to be present during investigations

Compliance ensures that the due diligence process is conducted legally and ethically.

Insurance Requirements

Buyers are typically required to maintain a commercial general liability insurance policy during the due diligence period. This policy should:

  • Include a broad form contractual liability endorsement
  • Have a combined single limit of at least $2,000,000 per occurrence for bodily injury and property damage

This insurance protects both the buyer and the seller from potential risks during the investigation process.

Understanding the due diligence period is essential for navigating a contract of sale real estate. Next, we’ll dive into title matters and the importance of title insurance in real estate transactions.

Title Matters and Title Insurance

When buying real estate, understanding title matters and title insurance is crucial. These elements ensure that you have clear ownership of the property and protect you from future claims. Let’s break down the key components.

Title Commitment

A title commitment is a promise from a title company to issue a title insurance policy. It outlines the terms and conditions under which the policy will be issued. The title commitment is divided into several parts:

  • Schedule A: Provides basic information about the property, including the legal description and the names of the current owners.
  • Schedule B: Lists exceptions to the title, such as easements, restrictions, and unpaid taxes. These are items that will not be covered by the title insurance.
  • Schedule C: Details any requirements that must be met before the title insurance policy can be issued, such as paying off existing liens.

Unpermitted Exceptions

Unpermitted exceptions are title issues that are not acceptable to the buyer. These can include unknown liens, boundary disputes, or claims of ownership by third parties. If unpermitted exceptions are found in the title commitment or survey, the buyer must notify the seller in writing before the Title Objection Notice Date. The seller then has the option to address these issues.

If the seller cannot or chooses not to resolve these exceptions, the buyer may have the right to terminate the contract. However, the seller is not obligated to cure these issues unless they are Monetary Liens (e.g., mortgages or tax liens placed by the seller).

Permitted Exceptions

Permitted exceptions are title issues that the buyer agrees to accept. These could include utility easements or zoning restrictions that do not significantly impact the property’s use. Understanding these exceptions is important as they remain with the property even after the purchase.

Title Insurance Policy

A title insurance policy protects buyers and lenders from financial loss due to title defects. There are two main types:

  • Owner’s Policy: Protects the buyer’s ownership rights. It covers issues like fraud, forgery, undisclosed heirs, and errors in public records.
  • Lender’s Policy: Protects the lender’s interest in the property. It ensures the lender’s lien is valid and enforceable.

Owner’s Affidavit

An owner’s affidavit is a sworn statement by the seller confirming that there are no known title issues, such as unpaid taxes, liens, or disputes. This document provides additional assurance to the buyer and the title company. It helps to clear any potential doubts about the property’s title.

Real Estate Title Insurance - contract of sale real estate

Title matters and title insurance are essential parts of a contract of sale real estate. They ensure that the buyer receives clear ownership and is protected from future claims. Next, we’ll explore common contingencies in real estate contracts to further safeguard your investment.

Frequently Asked Questions about Contracts of Sale in Real Estate

What does a sales contract mean in real estate?

A sales contract in real estate, also known as a contract of sale, is a legally binding agreement between a buyer and a seller outlining the terms and conditions of the property transaction. It includes details like the purchase price, closing date, contingencies, and responsibilities of each party.

This contract ensures that both parties are clear on the terms and reduces the risk of disputes. For example, it specifies if the seller must make any repairs before closing or if the buyer needs to secure financing by a certain date.

What is the difference between a sale and a contract to sell?

A sale is the actual transfer of property ownership from the seller to the buyer. It happens at the closing when all conditions of the contract of sale real estate are met, and the buyer pays the agreed purchase price.

A contract to sell, on the other hand, is the agreement made before the sale. It outlines the terms and conditions that must be fulfilled for the sale to occur. Think of it as a promise to transfer ownership once all the specified conditions are met.

Is there a standard real estate contract in Florida?

Yes, Florida has several standard real estate contracts widely used to facilitate property transactions. The most common ones are:

  • FloridaRealtors/FloridaBar contracts (FR/Bar): These include the standard Residential Contract for Sale and Purchase and the “AS IS” version. These contracts are calculated using calendar days.

  • Contract for Residential Sale and Purchase (CRSP): This contract is calculated using business days and includes provisions for the arbitration of disputes.

These standardized forms help ensure that all necessary details are covered and provide a clear framework for both parties to follow. They can be customized with addenda to fit specific needs, such as inspection periods or financing contingencies.

Understanding these standard contracts can give you confidence and clarity when entering into a real estate transaction in Florida.


Understanding the contract of sale real estate is crucial when buying or selling a home. These contracts are the backbone of the transaction, outlining every detail from the purchase price to contingencies and closing dates. Knowing what each section means can protect your interests and help avoid costly mistakes.

At Moton Legal Group, we believe in empowering our clients through education. We simplify complex legal terms so you can fully understand what you’re signing. Our goal is to make sure you are well-informed at every step of the process.

Client empowerment is at the heart of what we do. We provide the knowledge and tools you need to navigate the legal landscape with confidence. Whether you’re a first-time homebuyer or a seasoned investor, our experts are here to guide you.

A well-crafted contract is more than just a legal requirement. It’s a roadmap to a successful real estate transaction. With the right approach and support from Moton Legal Group, you can create contracts that foster strong, lasting business relationships.

For more information on how we can assist you with your contractual needs, visit our contract review service page. Let us help you build the foundation for your business’s success.

Thank you for trusting us with your real estate needs. We look forward to assisting you in achieving your property goals with precision and professionalism.

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In summary:
– Understanding contracts is vital for protecting your interests.
– Moton Legal Group is here to simplify and clarify the process.
– Empowering clients with knowledge is our mission.
– A well-crafted contract can ensure a smooth and successful transaction.

Explore our services in detail at Moton Legal Group Business Agreement Drafting. We’re here to help you navigate this journey with confidence and peace of mind.

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