Congratulations—you received an offer! But before you celebrate, remember that offers aren't just numbers—they're legal contracts with terms that could make or break your sale.
Even experienced sellers tell me they focus mainly on the purchase price, but I always remind them: the contract terms matter just as much as the dollar amount. After reviewing hundreds of purchase contracts with sellers, I've seen how overlooking key clauses can lead to delays, renegotiations, or lost deals.
Here's what every seller must understand about purchase contracts.
Understanding the Basics
A purchase contract (also called a Purchase Agreement) is a legally binding document that outlines:
- Purchase price and payment terms
- Closing date and timeline
- Contingencies that must be satisfied
- Items included or excluded from the sale
- Responsibilities of both buyer and seller
- What happens if someone fails to meet their obligations
Once signed by both parties, this contract governs your entire transaction.
Key Contract Elements Sellers Must Review
1. Purchase Price and Payment Terms
Don't just look at the total price—examine:
- Down payment amount: Higher down payments indicate more committed buyers
- Financing details: Cash offers vs. conventional loans vs. FHA/VA loans
- Earnest money: Shows buyer's commitment (typically 1-3% of purchase price)
- Closing cost arrangements: Who pays what fees
Example: Two offers for $300,000—one with 20% down and one with 3% down. The 20% down offer is stronger because it's less likely to face financing issues.
2. Timeline and Deadlines
Critical dates to verify:
- Closing date: Make sure it works with your timeline
- Inspection deadline: Usually 7-14 days from contract acceptance
- Financing deadline: When buyer must secure loan approval
- Appraisal deadline: When property must be appraised
Missing any deadline can void the contract or give the other party grounds to cancel.
Contingencies: Your Protection and Risk
Contingencies are conditions that must be met for the sale to proceed. Common contingencies include:
1. Inspection Contingency
- Allows buyer to inspect the property and request repairs
- Gives buyer the right to cancel if unsatisfied with inspection results
- Seller consideration: Shorter inspection periods reduce your risk
2. Financing Contingency
- Buyer must obtain loan approval by a specific date
- Protects buyer if they can't get financing
- Seller consideration: Cash offers or pre-approved buyers carry less risk
3. Appraisal Contingency
- Property must appraise at or above the contract price
- Protects buyer from overpaying
- Seller consideration: If home appraises low, you may need to reduce price or buyer must make up difference
4. Sale of Buyer's Home Contingency
- Buyer must sell their current home before purchasing yours
- Seller consideration: These offers are riskier and can delay your sale significantly
Contract Clauses Sellers Often Overlook
1. Inclusions and Exclusions
Clearly specify what stays and what goes:
- Appliances: Refrigerator, washer/dryer, wine fridge
- Fixtures: Chandeliers, custom mirrors, built-in speakers
- Outdoor items: Swing sets, sheds, landscaping features
- Personal property: Furniture, artwork, window treatments
Example problem: Seller planned to take the expensive chandelier but didn't exclude it in the contract. Buyer expected it to stay, creating a closing day dispute.
2. Repair Limitations
Some contracts include clauses about repairs:
- Dollar limits: "Seller will make repairs up to $2,000"
- Type restrictions: "No structural repairs required"
- Professional standards: "Repairs must be completed by licensed contractors"
3. Default and Remedy Provisions
Understand what happens if:
- Buyer defaults: Do you keep earnest money? Can you pursue other damages?
- Seller defaults: What are buyer's rights and your potential liability?
- Contract disputes: How are disagreements resolved?
4. Possession and Occupancy
Clarify when buyer takes possession:
- At closing: Standard arrangement
- Post-closing occupancy: You remain in home briefly after closing (risky)
- Pre-closing possession: Buyer moves in before closing (very risky)
Red Flags in Purchase Contracts
Be cautious of:
- Unusually long contingency periods: Extended inspection or financing deadlines
- Vague repair language: "Property must be in good condition" without specifics
- Low earnest money: May indicate less committed buyers
- Excessive buyer protection: One-sided contracts that favor buyer heavily
- Unrealistic timelines: Closing dates that don't allow enough time for financing
Questions to Ask Your Realtor
Before signing any contract:
- Are the contingency deadlines reasonable?
- How strong is this buyer financially?
- What are the biggest risks in this contract?
- How does this compare to other offers we've received?
- What happens if we need to extend the closing date?
Negotiation Opportunities
Remember, almost everything in a purchase contract is negotiable:
- Price and closing costs
- Contingency deadlines
- Repair responsibilities
- Closing date
- Included/excluded items
Don't accept the first offer without understanding all terms and considering counter-offers that better protect your interests.
Final Thoughts
A purchase contract is much more than an offer—it's the legal framework for your entire transaction. Taking time to understand every clause, deadline, and contingency protects you from surprises and helps ensure a smooth closing.
Remember: The highest offer isn't always the best offer. A slightly lower offer with better terms, fewer contingencies, and stronger financing may be worth more in the long run.
Your signature makes this contract binding, so make sure you understand exactly what you're agreeing to before you sign. When in doubt, ask questions—your future self will thank you.
Disclaimer: This blog is for educational purposes only and does not constitute legal advice. Always consult with your licensed real estate agent and attorney for guidance specific to your situation. Real estate laws and requirements may vary and change over time.