Real estate contracts can be complicated and require a great deal of work to properly execute. A well-drafted, executed contract with the necessary elements can be very helpful to protect both parties in a real estate transaction. While New York law is fairly lenient with respect to real estate sales, a poorly executed contract can lead to expensive and time-consuming litigation. In this article, we will discuss a few basic concepts when reviewing a contract and the different terms associated with an executed contract as opposed to an executory contract.
An executed contract is a legally binding agreement where all parties have performed their responsibilities and have effectively given legal effect to the terms of the contract. An executed contract may also be referred to as “a complete and fully effective agreement.” The most important factor when determining whether a contract is executed is that all parties have performed their responsibilities. The execution date and the effective date of a contract can be found in each party’s contract, and it is important that both dates are accurate and reflect the true execution of the contract.
For example, when you purchase a house, the contract is not considered an executed contract until you are handed the keys at closing. The execution date of the contract may be today, but the effective date is when you move into your brand-new home. If the seller fails to pass the papers at closing, there may be a breach of contract and the breaching party can bring a specific performance action against the seller to obtain the deed and other rights under the executed contract.
Another factor that needs to be taken into account is when a contract contains a choice of law provision for New York. A recent trilogy of decisions mandates that a court will enforce the choice-of-law provision in a clear and straightforward manner, without engaging in an outdated choice-of-law analysis. These cases are important because they demonstrate that a New York court will not consider public policy concerns from another state or jurisdiction when analyzing an executed contract that includes a New York choice-of-law provision. This is in line with the legislative purpose of New York General Obligations Law SS 5-1401.
When the seller accepts your offer for a home, it's definitely good news, but it doesn't legally bind either of you to actually close the deal. For that, you'll need to sign an executed contract with the seller that will lay out all of the terms of the sale, including any contingencies that must be fulfilled before the closing date. For this reason, it's important for both sides to work quickly and efficiently to finalize an executed contract.
New York real estate contracts are generally written by attorneys, though some sellers may use their own lawyers or simply fill out standardized, pre-printed forms provided by the seller's broker. Regardless, both the buyer and seller should retain their own attorney early in the process to ensure that all critical issues are discussed and resolved, avoiding misunderstandings later on and ensuring a clear executed contract.
The key to a successful real estate transaction is a well-drafted executed contract, laying out all of the essential terms of the sale, including the price, an adequate description of the property, and details of any events that must happen before the deal can close, or "contingencies." The seller typically gives the buyer a time frame to obtain a mortgage loan commitment, for example. If the buyer is unable to do so, the executed contract must contain a clause that allows the buyer to cancel the purchase and receive a refund of their contract deposit.
Other common real estate contract terms include a down payment, inspections, and the closing date. The executed contract should also include a section that provides for a home warranty, a survey, and the buyer's financial due diligence. Finally, the executed contract must contain what's known as a habendum clause that obligates both parties to take action if any event occurs that would make the contract voidable, such as the revocation of a license or the failure to perform essential building services.
Real estate contracts can seem overwhelming with all of the legal terminology, but they are fairly straightforward, and if both parties have done what they promised to do, they'll be able to move forward with their sale under the executed contract. However, if a buyer backs out of the executed contract at any point during this stage, they could be held liable for damages to the seller. For this reason, buyers should always carefully read through the entire executed contract before signing it and handing over their contract deposit.
The purchase and sale of real estate is often a complex process, especially in New York. A lot of details need to be negotiated and hammered out before the contract is signed, which is why it is very important for both buyers and sellers to understand the different elements that go into a real estate transaction and an executed contract. In this article, we will discuss the basics of contracts, how a buyer becomes "under contract," and the importance of having an attorney review your executed contract.
The most basic form of a real estate contract is a purchase, or offer to purchase. This will contain all the terms and conditions of the sale and transfer of property ownership. These will include the price, an adequate description of the property, and a closing date. They will also include any events that must occur before the closing can take place, known as contingencies, which must be explicitly stated in the executed contract.
A seller can either accept an offer or present a counter-offer. Once the offer has been accepted, the parties are obligated to follow through with the transaction under the terms of the executed contract. It is not until the contract is fully negotiated and signed by both parties that it is considered binding and an executed contract. This is why it is important for a buyer to have their lawyer review all of the contracts before they are signed.
There are several forms of real estate contracts, and each type has its own set of provisions that need to be followed. Purchase contracts, or offers to purchase, are used in the majority of residential transactions. These will typically contain a price, an adequate description of the property, a closing date, and a list of events that must happen before the closing, known as contingencies, all of which are included in the executed contract.
Other types of real estate contracts that can be used in a transaction are leases and land contracts. Leases will create a contractual agreement between the owner of the property and a tenant, outlining a specified monthly rate, security deposit, and the obligations of both parties during the lease term, and must be properly executed to be effective. Land contracts, on the other hand, are a unique form of financing that allows a buyer to pay a seller in installments for the transfer of title to the property. Land contracts are legal in the state of New York, but they must adhere to strict regulations and requirements, and need to be an executed contract to be enforceable.
When a real estate contract is considered fully executed depends on whether or not both parties have met all of their contractual obligations under the agreement. If a buyer or seller fails to meet any of their obligations, the other party is able to terminate the executed contract. This is why it is so important for both buyers and sellers to have their lawyers review any real estate contracts before they are finalized.
It is also very important for first-time home buyers to understand that a real estate contract is not considered finalized until it has been fully executed. If a buyer claims to be "under contract," they are not legally obligated to complete the transaction until their attorney has reviewed all of the contract documents and written an amendment that all parties agree to, thus making it an executed contract. If this is not done, a buyer could be stuck with a property they can't afford to buy and have no recourse against the seller for breach of the executed contract.
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