Generally, a real estate sale begins with a contract and ends with a deed. The deed fulfills the contract, and the contract is merged into the deed.
A Real Estate Sales Contract
1. Is negotiated between the parties.
A buyer and seller negotiate about the purchase and sale of a piece of property. They negotiate about what conditions will permit the buyer or seller to terminate the contract and cancel the purchase and sale, how much the buyer will pay, when the buyer will pay, what rights in the property the seller will sell, what obligations the buyer or seller will have after the purchase and sale.
2. Sets the terms of the sale.
Once the buyer and seller agree on all the terms of the sale, they sign a contract that spells out all the details of their agreement.
The contract serves three primary purposes. It sets the date of closing, lists the actions the buyer and seller must or may take before closing (the inspection period), and describes the terms that must be in the deed.
3. Ceases to have any force after the deed is signed.
When the deed is signed, the contract is said to be merged into it. It is assumed that all the actions that were supposed to be taken before closing were taken or were waived. And it is assumed that all the important terms in the contract were translated into the deed or were waived.
4. Common Additional documents are
Seller’s disclosure of property condition.
Seller’s disclosure of lead-based paint. (home built before 1978)
A General Warranty Deed
1. Is drafted according to the contract.
If the contract calls for a straightforward sale, then the deed will be pretty short, though it does contain some ‘magic words.’ If the sale is more complicated, the deed will be longer. The most common complication is an installment sale, in which case the deed will contain a lien allowing the seller to take the property back if the buyer doesn’t make all the payments.
2. Is signed at closing.
The closing is a meeting at which the buyer gives payment and the seller signs the deed. Any other documents that must be signed for the sale will also be signed at the closing. In a very real sense, this closes the sale. The buyer walks out an owner, and the seller walks out a former owner.
3. Transfers title to the property.
The signed deed is filed in the real property records at the county clerk’s office. That gives notice to the world of who owns the property. That is the document that a court will examine if there is ever a dispute about who owns the property.
4. Lists any other agreements pertaining to the property.
Any other agreements that affect the property must be listed in the deed, or they will not affect title to the property. If the buyer has promised to pay for the property over a period of time, the promissory note will be listed in the deed.
A Deed of Trust & Real Estate Lien Note
1. Deed of trust sets out procedure for non-judicial foreclosure if buyer defaults.
2. Real estate lien note sets the terms of the installment loan that the buyer is using to finance the purchase. It can be between the buyer and the seller or between the buyer and a third party.
© 2022 by Robin T. Cravey