Section 1 of the contract titled ‘Property’ outlines the principals in the transaction, the Buyer and the Seller, as well as the property and the intended purchase price and monetary obligations. For the most part, this section is pretty self-explanatory but there are a couple lines I’ll go over.
On lines 3 and 4, the contract states that the parties agree to buy and sell ‘the real property with all improvements, fixtures, and appurtenances thereon or incidental thereto’. If you’re like me, the first time I read that I thought, “Huh? Plain English please!”
Generally speaking, this means that the Seller is agreeing to sell the dirt and anything built upon it that is attached, ie the house, and anything else that is attached to the house, ie cabinetry, appliances, light fixtures. In turn, the Buyer is agreeing to purchase the dirt and everything else attached.
You see, unless the home is attached to dirt, real estate licensees are not involved in the purchase or transfer of the personal property. For example, the sale or purchase of a mobile home not attached to real property is done via a bill of sale, sort of like a car.
The next section has three different property identifiers, the physical address, an assessor’s number, and the legal description. Both the legal description and assessor’s number should be located using tax records. Each property has a unique legal description, some can be many lines long and quote townships and ranges, sections and subsections. Others can simply be a subdivision and a lot number; it just depends on the property.
The next few lines outline how the property will be paid for. This section will include the full purchase price, the earnest money, and how the remaining balance will be paid. Earnest money is deposited with the escrow company upon contract acceptance, unless otherwise stated in the contract. The escrow company is a neutral third party in the transaction and is instructed to carry out the instructions contained within the contract. They are not allowed to act on either party’s behalf without mutual consent, again unless otherwise stated in the contract.
We’ll talk about the release of earnest money later in the contract when we examine the Title and Escrow section.