In 2025, the U.S. housing market continued to involve millions of transactions, with the National Association of Realtors reporting approximately 4.06 million existing-home sales in 2024, the lowest annual total since 1995, showing the continued importance of understanding real estate agreements.
A real estate contract is an agreement that outlines the rights and responsibilities of the buyer and seller in a property transaction. In addition to the purchase price and closing date, buyers should also review items such as contingencies, financing terms, property disclosures, and other provisions that may affect their legal rights or financial obligations if problems arise before closing.
Let’s look at the 3 things to check in a residential real estate contract to help you avoid costly mistakes, make informed decisions, and move forward with greater confidence in your property transaction.
Confirm the Property Description and Purchase Terms Are Accurate
The contract must identify the property with precision. So the correct legal description from the deed, the right address, and an accurate inventory of what is actually included in the sale.
Confirm that the fixtures, appliances, and anything built in are to pass along with the property unless someone says they are excluded. Stuff that the seller plans to haul away should be carved out clearly in writing, not just mentioned.
Also, the purchase price, the deposit number, and the breakdown for closing costs have to line up exactly. Any verbal promise made during the talks that doesn’t show up in the written contract doesn’t legally count.
And if the seller agreed to some concession or credit, that has to be visible in the paperwork. Buyers and sellers sometimes carry different recollections of what was agreed to verbally. The contract is the only version that matters.
Understand Every Contingency and Its Deadlines
Contingencies are the contractual off-ramps that let a buyer exit without losing the deposit under defined circumstances. The most common are financing, inspection, and appraisal. Each comes with a deadline, and missing that deadline can be as costly as having no contingency at all.
Contingency terms are worth reviewing carefully, and several matter most. The financing contingency confirms the timeframe to obtain a loan commitment and the specific loan type, interest rate ceiling, and loan amount covered. If your financing falls through outside these parameters, your deposit may not be protected.
The inspection contingency sets the deadline to complete a home inspection and deliver written objections to the seller. Buyers who find problems but miss the objection deadline lose the right to terminate based on those findings.
The appraisal contingency defines what happens if the property appraises below the purchase price. Without this, a low appraisal may require the buyer to cover the gap or lose the deposit walking away.
The sale of an existing home contingency allows the buyer to exit if their current property does not sell by a specified date. Sellers may include a kick-out clause that lets them continue marketing the home during this period.
The Consumer Financial Protection Bureau recommends reviewing all contingency timelines against your lender’s estimated closing timeline before signing. If your loan commitment is issued after your financing contingency deadlines expire, you will be unprotected.
What Seller Disclosures Cover and What They Don’t
It is a rule in most states to have sellers fill out a disclosure form to list the known overall situation of the property they’re selling. This should include the known defects, earlier repairs, and key conditions that can affect the property. In accordance to this rule, the Federal law under the Residential Lead-Based Paint Hazard Reduction Act asks for disclosure of known lead paint hazards in dwellings built before 1978.
But it may be a disservice to the buyers when these disclosures are only useful as to what the sellers know and the level of honesty they allow. They do not substitute for an independent inspection, and they do not transfer liability for conditions the seller did not know about.
You must first inspect the document you are signing. Take a look at the disclosure form and compare against the inspection report once you have it on hand. If you notice any discrepancies, that can turn into negotiating leverage. And in cases of intentional concealment, it can be used as grounds for a legal claim.
Termite history is one of those disclosure items people tend to overlook the most, and it can quietly become a serious dispute later on. This happens especially when treatment records or a termite bond turns out to be incomplete or even a bit misleading. Destin termite damage lawyer Thomas F. Campbell handles this exact case, where a buyer later discovers termite damage that a seller, or a pest control company, should have disclosed before closing.
Closing Costs, Credits, and What the Loan Estimate Should Show
Closing costs on a home purchase are usually somewhere around 2% to 5% of the loan amount, per the Bankrate and Urban Institute data. If you look at a median-priced home in 2024, then you can expect about $8,000 to $21,000 to be paid at closing, in addition to whatever down payment you’re already making.
What the Contract Should Specify
The purchase agreement needs to make clear which side takes care of the specific closing costs. Who handles title insurance, transfer taxes, escrow fees, and recording fees can end up different from state to state, and it is often something that can be negotiated. Also, any seller credit toward closing costs that gets agreed to during the talks should be written down in the contract before anyone signs it.
What the Loan Estimate Shows
When you apply for a mortgage, your lender is required under the Real Estate Settlement Procedures Act, or RESPA, to send you a loan estimate within three business days. That paper breaks down all expected closing costs, lender charges, prepaid interest, property taxes, and homeowner’s insurance reserves too.
Check the contract terms and double-check that the figures line up, because they should match. Discrepancies between what the contract says and what the loan estimate shows are a conversation to have before closing day.
Default Clauses and What Happens If Either Party Fails to Close
Most buyers read contingencies carefully and overlook the default provisions entirely. That is a mistake. The default clause defines the remedies available to each party if the other fails to perform.
In most standard residential contracts, the seller’s sole remedy for a buyer default is retention of the earnest money deposit as liquidated damages. But some contracts also allow the seller to sue for specific performance, so a court could order the buyer to finish up the deal.
If the seller defaults, the buyer might get back the deposit with added damages, or they could try for specific performance too and compel the sale to go through.
Contracts that cap the seller’s remedy at the earnest money give a buyer a defined maximum cost to exit. Contracts that preserve specific performance rights on both sides create substantially more legal exposure.
Reading the Contract Before You Need a Lawyer to Explain It
Real estate contracts are not standard in the way that assumption implies. Terms are negotiated, addenda are added, and provisions differ from one jurisdiction to the next.
The Federal Trade Commission’s home buying guide recommends that buyers understand every provision before signing and consult with a qualified professional on any clause that is unclear or unusual. Contracts that are well understood before they are signed rarely become a problem after.
The most expensive real estate mistakes do not happen at closing. They happen at signing, when the contract is treated as a formality rather than the document that governs everything that follows.