The most common contract we see is the Oklahoma Real Estate Commission’s Residential Sales Contract. This is a standard real estate contract used to purchase residential homes. It can also be used to purchase acreages, but for land and larger properties, we typically use either a land contract or a farm/ranch contract. You can download a copy by clicking on the link.
My comments are in italics.
Opening
The Parties’ signatures at the end of the Contract, which includes any attachments or documents incorporated by reference, with delivery to their respective Brokers, if applicable, will create a valid and binding Contract, which sets forth their complete understanding of the terms of the Contract. This agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. The Contract shall be executed by original signatures of the parties or by signatures as reflected on separate identical Contract counterparts (carbon, photo or fax copies). The parties agree that as to all aspects of this transaction involving documents an electronic signature shall have the same force and effect as an original signature pursuant to the provisions of the Uniform Electronic Transactions Act, 12A, Oklahoma Statutes, Section 15-101 et seq. All prior verbal or written negotiations, representations and agreements are superceded by the Contract, which may only be modified or assigned by a further written agreement of Buyer and Seller. Seller agrees to sell and convey by General Warranty Deed, and Buyer agrees to accept such deed and buy the Property described herein, on the following terms and conditions:
This section basically says that any other prior agreements, verbal or written, are superseded by this written contract. So whatever was said during negotiations, if it is not in this contract or an addendum, is not valid. It also says the seller is conveying a General Warranty Deed.
Section 1
The Property shall consist of the following described real estate located in _____________________________ County, Oklahoma.
1. LEGAL DESCRIPTION. …………………………………………………………………
Together with all fixtures and improvements, and all appurtenances, subject to existing zoning ordinances, plat or deed restrictions, utility easements serving the Property, including all mineral rights owned by Seller, which may be subject to lease, unless expressly reserved by Seller in the Contract and excluding mineral rights previously reserved or conveyed of record (collectively referred to as “the Property”.)
Section one contains the legal description of the property. An address is NOT a legal description. The legal description is what is on the tax records. This section also says the property includes fixtures & improvements and is subject to zoning and other restrictions unless otherwise spelled out and reserved in the contract. This contract excludes mineral rights, although those can be added (but seldom are on a residential property purchase).
Section 2
Purchase Price, Earnest Money and source of funds. This is a CASH TRANSACTION unless a Financing Supplement is attached. The Purchase Price is $__________________________ payable by Buyer as follows: Buyer has paid $__________________________ as Earnest Money on execution of the Contract, and Buyer shall pay the balance of the purchase price and Buyer’s Closing costs at Closing. Upon execution of the Contract, the Earnest Money shall be deposited in the trust account of ______________________________________or if left blank, the Listing Broker’s trust account, as part payment of the purchase price and/or closing costs. If interest accrues on Earnest Money Deposit in Listing Broker’s trust account, said interest shall be paid to “Oklahoma Housing Foundation”.
This basically spells out the purchase price and the earnest money that is offered by the buyer. The earnest money is deposited into a trust account that is protected by law, and usually is a trust account controlled by the listing or selling broker. This money is brought to the closing as part of your down payment.
Section 3
Closing , FUNDING AND Possession. The Closing process includes execution of documents, delivery of deed and receipt of funds by Seller and shall be completed on or before __________________________________________, (“Closing Date”) or not later than __________________________________ days (five [5] days if left blank) thereafter caused by a delay of the Closing process, or such later date as may be necessary in the Title Evidence Paragraph of the Contract. Possession shall be transferred upon conclusion of Closing process unless otherwise provided below: _______________________________. In addition to costs and expenses otherwise required to be paid in accordance with terms of the Contract, Buyer shall pay Buyer’s Closing fee, Buyer’s recording fees, and all other expenses required from Buyer. Seller shall pay documentary stamps required, Seller’s Closing fee, Seller’s recording fees, if any, and all other expenses required from Seller. Funds required from Buyer and Seller at Closing shall be either cash, cashier’s check or wire transfer.
Section 3 basically spells out the closing and possession date. This is date is typically 30-45 days from the contract signing date, although it can happen sooner and sometimes takes longer depending on the circumstances of the real estate transaction.
Section 4
4. ACCESSORIES, EQUIPMENT AND SYSTEMS. The following items, if existing on the Property, unless otherwise excluded, shall remain with the Property at no additional cost to Buyer:
- • Attic and ceiling fan(s)
- • Bathroom mirror(s)
- • Other mirrors, if attached
- • Central vacuum & attachments
- • Floor coverings, if attached
- • Key(s) to the property
- • Built-in and under cabinet/counter appliance(s)
- • Free standing slide-in/drop-in kitchen stove
- • Built-in sound system(s)/speaker(s)
- • Lighting & light fixtures
- • Fire, smoke and security system(s), if owned
- • Shelving, if attached
- • Fireplace inserts, logs, grates, doors and screens
- • Free standing heating unit(s)
- • Humidifier(s), if attached
- • Water conditioning systems, if owned
- • Window treatments & coverings, interior & exterior
- • Storm windows, screens & storm doors
- • Garage door opener(s) & remote transmitting unit(s)
- • Fences (includes sub-surface electric & components)
- • Mailboxes/Flag poles
- • Outside cooking unit(s), if attached
- • Propane tank(s) if owned
- • TV antennas/satellite dish system(s) and control(s), if owned
- • Sprinkler systems & control(s)
- • Swimming Pool/Spa equipment/ accessories
- • Attached recreational equipment
- • Exterior landscaping and lighting
- • Entry gate control(s)
- • Water meter, sewer/trash membership, if owned
- • All remote controls, if applicable
- • Transferable Service Agreements and Product Warranties
A. Additional Inclusions. The following items shall also remain with the Property at no additional cost to Buyer: _______________________________
B. Exclusions. The following items shall not remain with the Property: _____________________________________.
Here the items that typically remain with the home are spelled out in writing so that everyone is clear what stays and what goes with the home. If the seller wants to reserved an existing item such as a special mirror, then it is spelled out in the exclusions. If the buyer and seller agree that an item will remain with the property, such as an outdoor playground, then that item is also designated in this part of the contract.
Section 5
Time periods specified in Contract . Time periods for Investigations, Inspections and Reviews and Financing Supplement shall commence on __________________________________________ ( Time Reference Date), regardless of the date the Contract is signed by Buyer and Seller. The day after the Time Reference Date shall be counted as day one (1). If left blank, the Time Reference Date shall be the third day after the last date of signatures of the parties.
This is one of the most important dates in the contract, because this defines the Time Reference Date. Many people overlook this date in the contract, but this is a key date that many other dates in the contract reference. The contract can be signed a month in advanced, but many of the activities such as inspections reference the time reference date instead. We typically like to start this time reference date a week or so after the contract is signed. This gives the buyer time to line up inspections, get their financial paperwork in place, etc. In many cases this time reference date is more important than the contract signing date!
Section 6
RESIDENTIAL PROPERTY CONDITION DISCLOSURE. No representations by Seller regarding the condition of Property or environmental hazards are expressed or implied, other than as specified in the Oklahoma Residential Property Condition Disclosure Statement (“Disclosure Statement”) or the Oklahoma Property Condition Disclaimer Statement (“Disclaimer Statement”), if applicable. A real estate licensee has no duty to Seller or Buyer to conduct an independent inspection of the Property and has no duty to independently verify accuracy or completeness of any statement made by Seller in the Disclosure Statement and any amendment or the Disclaimer Statement.
This states that the seller makes no representations about the property other than the Oklahoma Residential Property Condition Statement, which is normally included in the contract. The seller is required by law to list what they know about the property on this disclosure statement. This part of the contract also clarifies that is not the Realtor’s responsibility to conduct inspections or make representations about the property.
Section 7
INVESTIGATIONS, INSPECTIONS and REVIEWS.
A. Buyer shall have ____________ days (10 days if left blank) after the Time Reference Date to complete any investigations, inspections, and reviews. Seller shall have water, gas and electricity turned on and serving the Property for Buyer’s inspections, and through the date of possession or Closing, whichever occurs first. If required by ordinance, Seller, or Seller’s Broker, if applicable, shall deliver to Buyer, in care of Buyer’s Broker, if applicable, within five (5) days after the Time Reference Date any written notices affecting the Property.
B. Buyer, together with persons deemed qualified by Buyer and at Buyer’s expense, shall have the right to enter upon the Property to conduct any and all investigations, inspections, and reviews of the Property. Buyer’s right to enter upon the Property shall extend to Oklahoma licensed Home Inspectors and licensed architects for purposes of performing a home inspection. Buyer’s right to enter upon the Property shall also extend to registered professional engineers, professional craftsman and/or other individuals retained by Buyer to perform a limited or specialized investigation, inspection or review of the Property pursuant to a license or registration from the appropriate State licensing board, commission or department. Finally, Buyer’s right to enter upon the Property shall extend to any other person representing Buyer to conduct an investigation, inspection and/or review which is lawful but otherwise unregulated or unlicensed under Oklahoma Law. Buyer’s investigations, inspections, and reviews may include, but not be limited to, the following:
- Disclosure Statement or Disclaimer Statement unless exempt
- Flood, Storm Run off Water, Storm Sewer Backup or Water History
- Psychologically Impacted Property and Megan’s Law
- Hazard Insurance (Property insurability)
- Environmental Risks, including, but not limited to soil, air, water, hydrocarbon, chemical, carbon, asbestos, mold, radon gas, lead-based paint
- Roof, structural members, roof decking, coverings and related components
- Home Inspection
- Structural Inspection
- Fixtures, Equipment and Systems Inspection. All fixtures, equipment and systems relating to plumbing (including sewer/septic system and water supply), heating, cooling, electrical, built-in appliances, swimming pool, spa, sprinkler systems, and security systems
- Termites and other Wood Destroying Insects Inspection
- Use of Property. Property use restrictions, building restrictions, easements, restrictive covenants, zoning ordinances and regulations, mandatory Homeowner Associations and dues
- Square Footage. Buyer shall not rely on any quoted square footage and shall have the right to measure the Property.
- ___________________________________
C. Treatments , Repairs and Replacements (trr).
1) TERMITE Treatments AND OTHER Wood Destro ying INSECTS. Seller’s obligation to pay treatment and repair cost in relation to termites and other wood destroying insects shall be limited to the residential structure, garage(s) and other structures as designated in Paragraph 13 of the Contract and as provided in subparagraph C2b below.
2) TREATMENTS, Repairs , Replacements and Reviews. Buyer or Buyer’s Broker, if applicable, within 24 hours after expiration of the time period referenced in Paragraph 7A of the Contract, shall deliver to Seller, in care of the Seller’s Broker, if applicable, a copy of all written reports obtained by Buyer, if any, pertaining to the Property and Buyer shall select one of the following:
a. If, in the sole opinion of the Buyer, results of Investigations, Inspections or Reviews are unsatisfactory, the Buyer may cancel the Contract by delivering written notice of cancellation to Seller, in care of Seller’s Broker, if applicable, and receive refund of Earnest Money.
OR
b. Buyer, upon completion of all Investigations, Inspections and Reviews, waives Buyer’s right to cancel as provided in 7C2a above, by delivering to Seller, in care of Seller’s Broker, if applicable, a written list on a Notice of Treatments, Repairs, and Replacements form (TRR form) of those items to be treated, repaired or replaced (including repairs caused by termites and other wood destroying insects) that are not in normal working order (defined as the system or component functions without defect for the primary purpose and manner for which it was installed. Defect means a condition, malfunction or problem, which is not decorative, that will have a materially adverse effect on the value of a system or component).
i. Seller shall have __________ days (5 days if blank) after receipt of the completed TRR form from Seller’s Broker, if applicable, to obtain costs estimates. Seller agrees to pay up to $________________ (“Repair Cap”) of costs of TRR’s. If Seller, or Seller’s Broker, if applicable, obtains cost estimates which exceed Repair Cap, Seller, or Seller’s Broker, if applicable, shall notify Buyer or Buyer’s Broker, if applicable, in writing, within two days after receipt of cost estimates. If the amount of the TRR’s exceed the amount of the Repair Cap, Buyer and Seller shall have __________ days (3 days if blank) thereafter to negotiate the payment of costs in excess of Repair Cap. If a written agreement is reached, Seller shall complete all agreed TRR’s prior to the Closing Date. If an agreement is not reached within the time specified in this provision, the Contract shall become null and void and Earnest Money returned to Buyer.
ii. If Seller fails to obtain cost estimates within the stated time, Buyer shall then have ___________ days (5 days if blank) to:
a) Enter upon the Property to obtain costs estimates and require Seller to be responsible for all TRR’s as noted on Buyer’s TRR form, up to the Repair Cap; and,
b) If the amount of the TRR’s exceed the amount of the Repair Cap, Buyer and Seller shall have __________ days (3 days if blank) thereafter to negotiate the payment of costs in excess of Repair Cap. If a written agreement is reached, Seller shall complete all agreed TRR’s prior to the Closing Date. If an agreement is not reached within the time specified in this provision, the Contract shall become null and void and Earnest Money returned to Buyer.
D . Expiration of Buyer’s Right to Cancel Contract .
1) Failure of Buyer to complete one of the following shall constitute acceptance of the Property regardless of its condition:
a. Perform any Investigations, Inspections or Reviews;
b. Deliver a written list on a TRR form of items to be treated, repaired and replaced; or
c. Cancel the Contract within the time periods in Investigations, Inspections or Reviews Paragraph.
2) After expiration of the time periods in Investigations, Inspections and Reviews Paragraph, Buyer’s inability to obtain a loan based on unavailability of hazard insurance coverage shall not relieve the Buyer of the obligation to close transaction.
3) After expiration of the time periods in Investigations, Inspections and Reviews Paragraph, any square footage calculation of the dwelling, including but not limited to appraisal or survey, indicating more or less than quoted, shall not relieve the Buyer of the obligation to close this transaction.
E. Inspection of Treatments , Repairs and Replacements and final walk -through .
1) Buyer, or other persons Buyer deems qualified, may perform re-inspections of Property pertaining to Treatments, Repairs and Replacements.
2) Buyer may perform a final walk-through inspection, which Seller may attend. Seller shall deliver Property in the same condition as it was on the date upon which Contract was signed by Buyer (ordinary wear and tear excepted) subject to Treatments, Repairs and Replacements.
3) All inspections and re-inspections shall be paid by Buyer, unless prohibited by mortgage lender.
Section 7 spells out the buyers rights to inspection and review of the property. It tells how many days the buyer has to conduct their inspections, based off the time reference date. It also spells out that the seller will allow the buyer and buyer’s representatives onto the property to conduct inspections, and the seller will make sure that all utilities are in working order so the buyer can conduct said inspections. It also spells out how long the seller has to correct the deficiencies found. This is also where the repair cap is spelled out. The repair cap is a pre-agreed amount of repairs the seller agrees to make for the buyer. If the estimated repairs are above the agreed upon repair cap, then buyer and seller can renegotiate the contract or the buyer may withdraw from the contract and receive their earnest money back.
Section 8