Contract
Definition and meaning of Contract in real estate.
A contract is a legally binding agreement between two or more parties that creates, modifies, or defines a relationship and establishes mutual obligations. In real estate, contracts must be in writing to be legally enforceable in court under the statute of frauds.
In more detail
Real estate transactions rely on several types of contracts, including purchase agreements, listing agreements, leases, and deeds of trust. For a contract to be valid, it must include an offer, an acceptance, mutual agreement, competent parties, and consideration, which is typically money. Once signed, all parties are legally obligated to perform the duties outlined in the document. If one party fails to meet their obligations, they can be sued for breach of contract.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Essential elements | Offer, acceptance, consideration, competent parties, and legal purpose |
| Governing law | Statute of frauds (requires real estate contracts to be in writing) |
| Remedy for breach | Specific performance, damages, or contract cancellation |
A buyer and seller sign a written contract stating the seller will transfer the home title in exchange for the buyer paying the agreed purchase price.
Frequently asked questions
Can a real estate contract be verbal?
In almost all states, verbal contracts for the sale of real estate are not enforceable in court. They must be written and signed by all parties to be legally binding.
What is consideration in a real estate contract?
Consideration is something of value exchanged between the parties. In real estate, the buyer offers money, and the seller offers the title to the property.
Related terms
Sources & references
See our sources and editorial standards.