One of the major issues I see in real estate contracts are vague terms and clauses. With any contract, especially a real estate transaction, keeping everything super clear is important to insuring your client is fully represented and accurately protected.

An important note to remember is that when a contract is disputed in court, the “drafter” of the contract is held to a higher standard. Meaning, the drafter has the ability to use his/her own language at the outset. The law vies this as an advantage when drafting a contract. Therefore, if there is ambiguity in terms, it’s the drafter’s fault. Similarly, if the opposing side requests or makes changes to the legal instrument, the initial drafter should carefully examine these changes to make sure they are clear.

Here are several clauses where it’s essential to pay extra care:

  • Settlement Expenses – When requesting concessions from the seller, be sure not to sell the buyer short and limit what the closing costs can be used for. Allow the closing costs to be used for a wide variety of items. The lender will limit if they have to. Broader is better than narrower.
  • Settlement and Possession – With many contracts, there is a built-in extension of 10 days from the agreed upon settlement date. However, this is the default and can easily be modified with the approval of all parties. One party may want to close on the exact date while the other party may not have a time constraint.
  • Items to convey – Generally, any item in the home at the time the offer was made is fair game to convey. Any specific items mentioned in the contract should convey. If there’s ambiguity the seller should request clarity from the buyer. Otherwise, the item in the home will convey. This also includes certain fuel that may be in oil or propane tanks. The seller should also be proactive and specifically mention any items that will not convey with the home before the contract is ratified.
  • Repairs requested – Buyers and agents should not just merely copy the comments from the home inspection report. The home inspector is making certain recommendations and using broad language to protect him/herself. It’s important to review the home inspector’s notes and modify them as necessary to accurately convey what the buyer is requesting the seller to fix. If you use the words “repair or replace” – it’s important to be specific about what constitutes an adequate repair or an acceptable replacement.  If the buyer wants the item replaced, then omit the word “repair” from the repair addendum.

In the end, lean towards being more clear. Vague contracts create issues.

  • Posted by Hanger Law