Preparing a Real Estate Contract: 7 Key Elements You Need to Include

December 31, 2021

Meta Description: Drafting a real estate contract? Here are the seven things you must include to ensure all your bases are covered.


Before selling a house or other residential property, you need to have everything sorted out. The first step to arrange this matter is to prepare a real estate contract. This document will outline the terms of the deal and give legal protection for both a seller and buyer.

While you may know the basic terms of a real estate agreement, such as parties' contact details, effective date, and property address, there can be a few things you don't pay enough attention to. We've prepared seven things that you must include in your real estate contract to conduct the transaction successfully. Before creating the document, you might also take a look at the formspal's purchase agreement template to see the proper outline of the contract.

Property Description

The first thing you will need to do after identifying the parties and the effective date of the contract is to describe the property being sold. The mailing address is only half of the description. It's crucial to indicate the property type—whether it's a single-family home, townhouse, duplex, or apartment unit.

As a rule, your real estate contract should include the property's parcel ID and legal description. The legal description identifies the property's exact boundaries for the buyer to get the right piece of land. You can also specify any personal property sold together with the real estate.

Fixtures and Appliances

Usually, a real estate contract states that such fixtures as windows, screens, heating systems, HVAC components, and furniture fixed in position are included in the sale of the property. If you want to include or exclude specific fixtures in the sale, you will have to list them in the contract explicitly. The same goes to the appliances conveyed to the buyer with the home.

Financing Terms

Apart from the purchase price and earnest money deposit, it's necessary to include the transaction's closing costs, specifying who is paying for the standard fees associated with the home purchase. These fees may include escrow agent's fees, title search fees, and recording fees.

If the seller pays a part of the purchase price, you must specify this in the contract. As a rule, it comes in an addendum known as seller financing. The amount of money paid by the seller will be considered a loan that the buyer has to repay with a certain percentage of interest rate and within a specific period of time.


Buyer's contingencies are essential terms that many people overlook in their real estate contracts. However, including these provisions in the document will make the sale more appealing for buyers because it can provide them with additional advantages, such as time to inspect and appraise the property or give them the possibility to obtain financing for the purchase.

Home Inspection

It's necessary to include a provision regarding the home inspection in your contract. Many states require that the buyer has the right to perform a property condition assessment before the closing date. It's required to exclude any defects, encroachments, or acreage disputes. If the property condition is inappropriate, the seller will have to cure the flaws within a specified period. Otherwise, the buyer may cancel the agreement and have the deposit refunded.

Closing Date

The closing date is crucial in every real estate contract. It depends on how much time the parties need to complete the purchase transaction and usually comes after 40, 45, or 60 days. The seller and buyer are recommended to agree on a timeframe that works for both parties.

Disclosures and Addendums

A real estate contract often contains a lead-paint hazard disclosure. However, it's only required for dwellings built before 1978. The seller is recommended to include other disclosures, such as neighborhood nuisances or death on the premises if applicable. You should also consider attaching specific addendums to your contracts, such as seller financing addendum, short sale addendum, or inspection contingency addendum. Of course, these terms may be specified directly in the contract, but such addendums significantly extend the real estate contract terms.

The Bottom Line

Creating a real estate contract may seem challenging and confusing. But knowing the key terms of the document will make the process more straightforward for you. The main thing is to make the contract as comprehensive as possible. This will ensure that both parties understand the provisions and help them avoid any misunderstandings in the future.



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