Residential Real Estate Contract Terms Defined

By Katherine M. Macol, Esq.

The 2026 spring residential housing market is upon us. In addition to the purchase price, there are key provisions to be familiar with before signing a contract for the sale or purchase of a home:

1. PROPERTY DESCRIPTION:  The property description identifies more than just the property address to be transferred in accordance with the contract.  A property description is obtained from the land records of the town or city where the property is located and sets forth the boundaries of the property.  (The property description is not included in broker prepared contracts.)
2. DEPOSIT:  The deposit is the first payment toward the purchase price.  The amount of the deposit is typically ten percent (10%) of the purchase price but can be negotiated to any amount agreed upon by the buyer and seller.  The deposit is commonly paid, in full, upon the buyer’s execution of the contract or completion of the agreed upon inspections.
3. CONTINGENCIES: Contingencies are not mandatory in a contract. If a contract contains contingencies, the contingencies must be satisfied and/or waived by the buyer prior to the deadline set forth in the contract.  Contract contingencies commonly include the following:
   1. Financing: Allows the buyer to terminate the contract if a mortgage commitment cannot be obtained.
   2. Appraisal: Allows the buyer to terminate the contract if the property appraises for less than the purchase price.
   3. Inspections:  Allows the buyer to terminate the contract if any of the agreed upon inspections are not satisfactory to the buyer.
   4. Title  Search:  Allows the buyer to terminate the contract if there are objectionable encumbrances on title that affect marketability or the buyer’s intended  use of the property.
   5. Municipal Search:  Allows the buyer to terminate the contract if there are pending and/or uncurable violations, open permits, anticipated assessments and the  like.

In the event a buyer exercises the right to terminate the contract within the timeframe designated for a particular contingency and in accordance with the terms of the contract, the buyer is entitled to a refund of the any deposit paid to the buyer and the contract will, thereafter, be terminated by the parties.

4. DEFAULT: The default and remedy provisions of the contract set forth the penalty to be assessed against the defaulting party for non-compliance pursuant to the terms of the contract.  This can include loss of the deposit for the buyer and specific performance for the seller.
5. CLOSING DATE: The closing date is the date upon which title will be transferred from the seller to the buyer and the date upon which closing adjustments are typically made.  The contract may include a clause allowing either party to delay the closing for an agreed upon period of time before a penalty can be assessed to the delaying party.    If a closing date is “time of the essence”, closing on the specified date is mandatory and a harsh penalty can be imposed on the delaying party for non-compliance.

Buying or selling a house is an exciting event but all parties should be aware of the critical terms of the contract before signing on the dotted line!