Sales Contract, Line by Line

Don’t know all the lines and terms involved in a contract? Have questions on a transaction you are conducting with us? Want a free copy of a contract for your own transaction?

You have come to the right place if you answered any of those questions with a, “Yes”.

The following is the most descriptive and helpful guide for a standard land purchase contract. This is your standard contract for the State of Florida (Form FAR/BAR -7s). It is approved by the Florida Association of Realtors and the Florida BAR. You do not have to use this contract in your real estate transactions, as long as it covers the main points it can be written on an ordinary table napkin! For those of you that do not wish to leave the fate of your real estate transaction on a napkin, rest assured you can download a copy of the contract on the previous page.

Lines 1 -4

These lines are pretty self explanatory, make sure you populate the names of the buyer and the seller correctly.. Although it is good practice to get it right the first time, do not be concerned that you will not be able to add your middle name onto the deed because it is not on the contract. The last word in deed preparation is the Title Company. If you are transacting through a private seller, the seller will usually send a preliminary copy of the deed in order to verify all information is correct.

Lines 5-8

Once again, a pretty straightforward section. You will put the county the property resides in, as well as the legal description. It would be adequate to enter the legal description you see straight from the tax bill or county assessor website liking to the legal description and tax information. This information is essential and must be double verified for accuracy. Incorrect information in this section is usually a red flag and would be very easy for either party to back out of the transaction. The last thing you want to do is to secure a great deal, and then have the seller get off on a minor technicality. Also, you want to make sure the seller is selling you the parcel you both agreed on purchasing!

Line 9

This field is for the street address to the property. Since property is conveyed using a legal description and not an address, this is not of extreme urgency when dealing with vacant land. If you do not know the address of the vacant parcel, listing the city and zip code would be sufficient. In purchasing a home, list the recognized home address on the contract. Since most people are not well versed with real estate legal descriptions, and for the safety of the buyer and seller, you want to get in the habit of putting the street address whenever possible.

Lines 10-13

These lines apply if the transaction was for a home. If you are purchasing vacant land, you can either leave them blank or put an N/A for non applicable on these lines. In a home purchase, the standard appliances along with any other items would be listed here to be included in the sale. It is important to understand that unless otherwise stated on lines 14-15, these items must be included with the sale of the home. The blank lines are used to include any other items that are not listed but also agreed to be included in the sale, this can include anything from washer and dryers, to above ground swimming pools.

Lines 14-15

These lines are for any items that may have already been agreed to be excluded from the sale. If the seller decided they wanted to keep their refrigerator, lines 14 and 15 would be the places to disclose that information. Anything on these lines is not included in the sale of the home. Remember these lines apply to homes with personal property only!

Line 16

This is where the purchase price goes. The entire transaction price is listed here regardless of how much money you are putting down, or any other loan information. This is the total price you agreed to pay for the property.

Line 17

NA

Line 18

This line states where the deposit money for the contract is being held. Florida law states that a contract is not legal and binding without earnest or escrow money to accompany a legally binding contract. The name title company is written in the first blank of the line followed by the escrow (deposit) money. If you are unsure which title company the transaction is being closed through, you can simply state “Seller’s Choice upon Acceptance”. Meaning, upon acceptance of the offer deposit money will be forwarded to the title company or attorney of the seller’s choice. Typical deposit amounts range from $500-$1500 on transactions under $100,000. There are no standard amounts by law, although keep in mind that termination of the contract causes escrow money to be released to the seller as “damages” for non-performance.

Lines 19-20

This field allows for additional money to be placed in escrow after a certain time has passed. Often, provided post a pre determined due diligence period, after an inspection of some sort, or perhaps the buyer is just coming into additional funds to put down at a later date. It is not unusual for people to put more money down after 7-10 days. Doing this is usually not necessary. This clause of the contract is primarily used for larger financial deals. Smaller deals generally are able to close quickly and would be impractical from a time standpoint to provide two deposits to the seller.

Line 21

If you are financing a portion of the transaction, this line highlights the amount wished to be borrowed. The seller will often base acceptance of the offer amount related to how much money the buyer is financing. If they have multiple offers, the seller is more likely to accept an offer with a lesser value being financed. Any lender is more likely to approve a lesser amount to be financed in turn minimizing their default risk.

Line 22

Any other agreement you may have, this is where it will go in , it could be a second mortgage, seller note, or anything else. Seldom is this line used.

Lines 23-24

This is the purchase price minus the deposit, financing, second deposit and any additional items from the “other” line(22). This is the monetary amount expected in order to close the transaction. In other words, it is the balance of the property that has not been accounted for.

Lines 25-32

From my real estate transaction experience, this section of the contract is highly overrated. In most dealings, the buyer and seller already agree on most of the terms before they are presented with a contract. This outlines the fact that if signatures are not present by the said date, then either party is released from any obligation of the contract.

This can turn out to be an effective tool when sending out an offer on that dream home you found. Example: You present a reasonable offer on your dream home spelled out in writing on the contract. Several days pass while not hearing anything from the seller. If your housing circumstances warrant a very tight time frame, this can prove to be very stressful. For all practical purposes in this scenario, your time frame to make a decision is a month. Well you have to make a move one way or another due to the time constraints. The the last thing you want to do is to make an offer on another home and then have the first seller crawl out of the wood works and accept your offer. In the meantime, you have found a home and paid a higher price or settled for a somewhere not at pleasing. In no way are you legally obligated to the contract even if the seller accepts your offer after the allotted acceptance date. However, If both parties agree upon the new date, the contract is valid.

More often then not, the buyer and seller have already agreed on a price before anything is put in writing. Problems may arise with the time frame you have your attorney, spouse, or any other individual involved with the transaction look over the paperwork Any one of these parties may take a few days causing date to lapse, or the mail may take a little longer than expected. More often than not we find ourselves just changing the date, and initialing the changes. If you are finding yourself getting close to the acceptance date, rest assured it can change. It is always important to allow a reasonable time frame for both parties. If you have a difficult buyer/seller, you’re going to want to adhere to this date a little more than if there is that comfort level with the buyer/seller.

Lines 33-49

This is the financing portion of the contract. It will leave the terms for financing that must be met or agreed upon within the transaction. Line 34 is the simplest of them all; it states that this is a cash transaction if there will be no financing. Once this box is checked the rest of the “financing” section may be ignored

Lines 35-47 state the contract is contingent on a buyer receiving a mortgage based on the following terms within those lines. The buyer will then have typically 7-30 days, (whichever you fill into the blank line) to get approved for the loan. If the buyer fails to obtain a lender for the highlighted term within this time frame, the buyer may leave the transaction without any further obligation. Any deposit monies will revert back to the buyer.

Line 48 states the transaction is contingent upon assumption of the existing loan. If the seller has a mortgage, you may be able to take it over. Although this practice in generally more rare, the option is still present and may fit your transaction.

Line 49 is used if you are obtaining seller financing. You would attach the proposal outlining all terms of the discussed note.

Lines 50-52

This section is reserved for title insurance. Title insurance covers the buyer from any unforeseen problems down the road pertaining to the deed to the property. Title insurance and what it is and why you get it will be saved for another article but until then we will stick with the contract. Here, it will be decided if the buyer or the seller is paying for title insurance policy. Generally it is agreed upon between the buyer and seller. Either party can pay for it, however, it is a common practice for the buyer to pay for this portion due to the fact that the title will be used by the buyer.

Line 55 is used if an attorney is going to do an abstract of title instead. We do not recommend this as it ends up costing more and you are not as protected vervues taking the full title policy through a liscensed title insurance company.

Lines 56-58

Lines 56 through 58 set a closing date for the transaction. Be sure to schedule based on the convenience in order to commit time to sign review and sign the documents. Allow a wide enough time frame to obtain financing, order inspections, and organize funds. Closings can be as quick as 1 week to as timely as 6 months, depending on a wide variety of factors.

Lines 59-65

This section states the seller is going to convey marketable title to the buyer. Meaning , the property is useful for the all the reasons advertised, and the buyer is getting what they planned on purchasing. Of course if you purchased this property for residential and it ended up being commercial, this issue would actually be the buyer’s problem. The seller may have or may have not known the property was commercial. It is important for a buyer to do their own due diligence prior to purchaseing. Purchasing property is a large financial commitment and should be researched before entering into any contractual agreements. Resources from the city/county are available free of change to check certain aspects of the property involved in the transaction. This section would apply if no liens were stated on the property and it was later found the property held with it several tax, contract, or any other liens all sorts. Closing at a title company and obtaining title insurance extensively checks the deed for any issues in the first place.

Line 65 if for the general use of the property, if it is a home, you would put something along the lines of “Single Family Residential”, if it was a vacant parcel, “Vacant Land”, “Investment Property”, etc., would suffice . The underlying ides is the fact that the buyer have a similar understanding in what the general use, or what it is being sold as.

Lines 66-69

These do not apply to vacant land. These lines apply to buying an existing home, or any other type of dwelling. The main idea is stating: When you take ownership, the previous owner is expected to be out of the said dwelling unless otherwise agreed upon, with a lease etc. This is always a common sense assumption, but it is safe to have everything in writing and agreed upon before the deal goes through the closing process.

Lines 70-71

This section states anything written by hand will be enforced before anything typed. If the price is typed in as $100,000 along with a hand written amount of $150,000(with the initials of both parties) and neither amount is crossed out, the contract price is $150,000! This is never a problem as handwritten changes have to be initialed by both parties and are usually agreed upon well in advance. Often times a new contract is typed in order to eliminate such errors and/or confusion.

Lines 72 -73

Assignability is an important aspect of the contract. Although, we talked about names and misspelling not being a significant issue, it is a huge issue if you fail to add a person to the contract. Assignability allows you to add, subtract, and replace names that are on the contract. The first checkbox states “Buyer may assign and thereby be released from any further liability under this contract”. if you found someone else that wishes to purchase the property, you can transfer your rights to purchase the property to this person, and even if they do not decided to purchase the property, you are not held liable at all. This is obviously the best option or the buyer but any savvy seller will not agree to this term.

The next box states “Buyer may assign but not be released from liability under this contract”. You can transfer your rights to the contract, but if the person you assigned the contract to decides not to go through with the transaction, then you are held liable to close on the property. The last box states “Buyer may not assign this contract”, you cannot assign the contract to anyone.

Lines 74-84

These lines are for any additional disclosures that are attached to the transaction. None of these apply to vacant land and only to homes. The disclosures have to do with items such as; asbestos, radon gas, lead based paint, etc. You will receive these disclosures in additional documentation. Generally, they are pretty straightforward in stating awareness of both parties. For example, a home built before 1976 could have been painted with a lead based paint. Remember, vacant land transactions do not require any riders of these sort. However, there may be special circumstances that need to be treated on a case by case basis.

Lines 85-86

If purchasing into a deed restricted community, or condo association, you are not going to want to sign the contract until you closely examine these documents. If you are moving into a community and would like to park a boat and later discover after reading the condo/homeowner association documents, boats may not be allowed to be parked, much time was saved in eliminating a future problem. If the property does not fall within a deed restricted community, and lays within the city limits, this section will most likely not be applicable. If you are purchasing within a community, condo association, deed restricted community, gated community, etc.,; It is general well known as it is used as a large selling point for these particular parcels and homes within the community.

Lines 87-90

These are just a continuation of the riders section.

Lines 91-94

This applies if there are creatures such as termites, etc., within the home. The seller will remedy the problem but and it is agreed the price for the necessary remedy services is not to exceed a certain amount. This covers the seller in case you decide to go through with ridding a home with termites and receive a very large bill for the work done and then are pointing fingers for who should foot the bill! This can simply be resolved by getting multiple estimates and coming up with a number with the seller as to what the most they are willing to pay is. All of these aspects are part of negotiations. If you encounter such issues, there is no standard. Each incident should be treated and agreed upon a case-by-case basis.

Lines 95-96

If you wish to purchase a home warranty, the option is here as to who will incur such costs. Home warranties are not mandatory, however, a buyer has the option to purchase from an outside source. A home warranty is verified within the section. In many cases, a seller will include a home warranty to accompany the home showing good faith to the buyer.

Lines 98-99

Any riders attached to this contract must be check off here. If the rider is not checked, they are useless to the transaction and will not be bound to the transaction.

Lines 100-103

Any special clauses not previously disclosed are written here. They can be anything from choosing a title company, stating the lawn ornaments stay in the lawn, putting a cap on closing costs, or stating the seller cannot uproot the oak tree’s sitting on the property. Possibilities are limitless and on a transaction by transaction basis. These are very useful lines as you can add considerations such as “Buyers closing costs not to exceed $XXX”, this way the buyer has a piece of mind knowing there is a limit on the amount of closing costs they will be accountable for.

Lines 113-116

Any and all buyers and sellers print, sign and date.

Lines 117-119

Any and all buyers enter their contact information.

Lines 120-123

If any brokers are involved, they will be included here. There are fields for both the listing and selling agent. It is good practice to put commission amount, or percentage, next to their name as well. In doing this, there is no argument with the Realtor and how much they are receiving. If there are no Realtors involved, you can just leave them blank or put NA. No additional commissions will be attached to the transaction.

Lines 124-270

These lines are pretty self explanatory. They are referred to as the “late night reading” portion of the contract. Contents include all the fine print and standard procedures put into every standard contract for real estate sales/purchases. Wording is very understandable and self defined. If there happens to be any questions in the last section of the contract, please do not hesitate to contact us with a particular batch of lines. We will do our best to make any clarifications.