This is a brief summary of real estate contracts. This summary does not cover all aspects of the contract. This video has been made specifically for Real Estate Agents to use as an unofficial educational resource. Nothing in this video is intended to convey legal advice or best practices in any field. This video is only intended to give general advice on broad topics relating to contracts and the closing process at large. For legal advice please contact an attorney and for lending advice please contact a lender.



These typically cover legal assessments for things such as yard issues. They are usually seen in cases where a property has been inherited and then ignored, resulting in a few months or even years worth of lawn overgrowth and general lack of upkeep. Oftentimes in these situations the house becomes an eyesore and neighbors will involve the city, resulting in the city fining the owner and stating that they have a certain amount of time to remediate the situation or else the city will take care of it at the owner’s expense. These become title issues, so if the seller knows about anything like this they have to make the attorney aware so we can add it to closing. These things need to be paid off in order to sell the property.



This occurs when one party isn’t doing their job to uphold the contract. If this happens then you can go to court, but this is fairly unlikely as there are a lot of restrictions — there can’t be a jury, it can’t be for more than $3,000, and it can’t involve a licensed real estate agent. The other option is arbitration, which can be lengthy, expensive, and generally frustrating because it is a final judgment made by one person, usually a retired judge or retired attorney, and you are 100% at that person’s whim. Not many people like to play chance with something as big as a property.

Though people in these cases do have legal rights, they also have to consider what is practical. They can fight forever over it, spend a lot of money on legal fees, and then possibly not end up with the property in the end anyway or not be able to afford it any longer, or they can force the sale but end up with nothing left in terms of personal possessions. It’s often the best case scenario to sit down with the person you’re disputing this with and have a practical conversation about it. These conversations are usually over earnest money and can typically be worked out in a way that is less financially destructive.



By default, the broker of the buyer’s agent holds escrow money. When earnest money is put down with the contract, it usually goes to the buyer’s agent and is held by their brokerage in a trust/escrow account. Some brokers will not hold these funds because they don’t want the responsibility of it; if it does result in a situation where the parties agree to go to court, this earnest money needs to be interpleaded into the court system, which means that the broker would have to give the money to the court and identify that this is what is being fought over and that they no longer want to be responsible for holding it. This way, once a decision is made, the court can just disperse it as necessary. If your broker does not wish to hold earnest, your attorney should be happy to hold the funds for you, but they will require an additional form that basically mimics the language in this section of the contract and states that both parties are allowing the attorney to hold the funds for that transaction.



It is very rare that it would actually come to this as most people don’t want to fight over these things for (possibly) years. They’d like the issue solved in the next month or so. The big point to take away from this section is that it’s a final court decision. It is not done in a court, but it will be filed with a court and can’t be challenged.

Click below to download the documents from this class


Sample Real Estate Contract (highlighted)

Corresponding Notes

Need more help with your contract? Call us at 256-533-5252.


Section 28-31:

Terminology Descriptions
Electronic Signature Provision
Entire Agreement Provision
CD/Settlement Statement

next section