Understanding real estate contracts

Maybe this is your first time purchasing a home, or your first home purchase in decades. Either way, attempting to go through a real estate contract can be intimidating.

However, knowing the essential components will help you better understand what you’re reading.

What should your contract include?

A real estate contract is a legally binding agreement between the seller and buyer of a home. While some may vary due to differing circumstances, they all have the same key elements.

Parties involved

The contract will specify the names of the buyer and seller.

Description of property

The home’s address is listed on the contract, along with the amount of land, any outbuildings, and property boundaries.

Purchase price and financing terms

The price of the property and payment terms are included in the contract. Financing may be through a mortgage, land contract, cash payment, or another option.

Closing costs and closing date

The contract includes the date that the sale will be finalized and who is responsible for the closing costs. It will also state the date the buyers take possession of the property.


The real estate contract will list any conditions that must be met before the sale can be finalized, such as the inspection report, the sale of the buyer’s home, or the ability of the buyer to secure financing.

Household items that are included

If appliances or furniture stay with the home, that will be noted on the contract.


The seller must disclose if they are aware of any issues or problems with the property.

Buying a home is a significant investment and decision. Therefore, you don’t want to leave anything to chance. Review your contract with someone who understands the contract’s language for your protection.