An Arkansas real estate sales contract addresses legal issues related to the purchase of a property. Your contract should include an identification of the parties, pricing terms, closing terms, contingencies, and other conditions. It should also comply with all state laws surrounding real property under the Code of Arkansas.
In this article, an Arkansas real estate attorney details the sections commonly found in real estate contracts. We wrote this post for sellers and buyers who want to know more about drafting an Arkansas real estate sales contract and the laws surrounding them.
Essential Sections of an Arkansas Real Estate Contract
The purpose of a sales contract is to ensure that a smooth and legally sound transaction occurs. However, it also serves as a roadmap for how both buyers and sellers should engage with one another and what to do if an unexpected issue arises. As such, it is vital that you get the terms and conditions of the agreement drafted correctly since miscommunication and legal mistakes can derail the entire process for everyone involved or result in a future dispute.
Below, we’ve outlined the essential sections to include in your Arkansas real estate contract that try to prevent these issues from arising.
This section properly identifies the buyer and seller. Generally, private party transactions identify each other by a legal name, while commercial transactions utilize the company name. You should also include the date that the contract becomes effective, as well as the addresses of both parties.
You should begin the body of your contract by including the accepted offer price for the property. Detail how the transaction should work by adding payment methods accepted, how the mortgage will work, and other related details. Earnest money requirements should also go into this section if the seller wants to confirm the contract in case financing issues arise.
Closing is when the seller formally transfers the property to the buyer for possession. It also marks the date by which the buyer legally takes ownership, which is then recorded in a bill of sale and filed with the county clerk’s office. The closing section of your contract should stipulate terms surrounding any changes, dates, and costs.
Ensure your contract explains details related to closing costs. Typically, the buyer covers closing costs, but there are some situations where the seller may want to cover them. Regardless, it is critical to have concrete terms surrounding closing dates and costs.
The buyer will also assume responsibility for all costs related to the property after closing, including taxes and special assessments. It is challenging to address taxes in some situations, which is why you may want to discuss your Arkansas real estate contract with an attorney. They can inform you of your legal options surrounding an addendum so that you can amicably address more unique tax situations while satisfying both parties.
The parties can require contingencies, or alternative agreements if there are any issues that arise before closing. These contingencies usually relate to inspections, appraisals, and financing. Essentially, a contingency says that a condition must be met by a specific date; otherwise, the transaction could halt or trigger another event.
Some of the most common contingencies include:
- Inspections. Inspections should occur by a specific date so that the buyer has some reassurance about the integrity of the structure. Buyers are usually responsible for inspection costs, but can negotiate disparities and repairs with the seller before signing the contract if the inspection brings new information to light.
- Appraisals. Appraisals determine property tax costs. If there is a discrepancy regarding the home’s value upon appraisal, it should be addressed before signing the real estate sales agreement. The seller should use this period to make necessary repairs.
- Financing. Financing contingencies typically include a down payment and a due date necessary for securing a mortgage. However, the prospect of getting a mortgage may fall through, leaving sellers without someone to purchase their property. In most cases, this contingency states that either party can back out of the transaction if financing does not occur as previously stated or intended.
Under AR Code § 18-12-201, the seller must prove and authenticate that they are the valid and legal property owner. By addressing the title in the contract, the buyer will have reassurance that they are purchasing from a genuine seller. You can even add a contingency stating that a title company will hold it until the closing date so that the seller cannot transfer ownership to another party.
Establishing specific dates is also a critical component of a real estate sales contract. Some of these dates should include the agreement expiration, offer withdrawals, and others not previously addressed in your contract but that are relevant to the transaction. You can also include cutoff dates by which either party must disclose changes to the standing agreement.
Signatures confirm that everyone is in agreement with the terms expressed according to the date signed. You can allow for wet ink signatures or permit the electronic signing of your agreement. Upon signing, the document becomes legally binding and enforceable under state and federal laws.
Get Advice on Arkansas Real Estate Sales Contracts
The real estate transaction attorneys at Milligan Law offices welcome you to contact our office for legal advice. Schedule an initial consultation by calling (479) 783-2213 or by sending us a message online.