Why is the contract the most important document in Real Estate?

• Contracts serve as a record of commitments for both parties.
• Contracts mitigate risks; preventing conflicts and legal issues.
• Contracts help an entire organization maintain compliance.  Bellator & You vs.  Unhappy Clients and The Alabama Real Estate Commission.
• Contracts serve as collaboration and communication.
• Contracts contribute to revenue for client(s) and income to us.
• Contracts increase operational efficiency.
• Contracts reflect a company's brand and value. The more knowledgeable you are, the more brand awareness you provide for yourself and your business.

The second most important thing in Real Estate is our knowledge and the ability to manage the contract.
 
Do you manage the contract or does the contract manage you?
 
The contract can be overwhelming for both buyers and sellers. Contracts are packed with legal jargon and clauses that can be difficult to understand. As a result, it's crucial for us to be knowledgeable and have a clear understanding of the contract, so we can manage the contract for our client(s).
 
We all know how frustrating it is when we are working a deal with an agent from a competing brokerage, and we end up educating them on specific aspects of the contract during the transaction. Imagine how our client(s) would feel if we were not knowledgeable about the document that secures their desired property.
 
The contract is the "legally" binding agreement between a buyer and a seller. It outlines the terms and conditions of the property closing and it is our responsibility to know, understand and manage the contract for our client(s) by these terms and conditions. The communication of these terms and conditions is essential to ensure details are accurate, and your client is clear to avoid any disputes later in the process.
 
Knowing, Understanding and the Ability to Manage the Contract is our VALUE proposition as a REALTOR®.  Navigating a contract can be complicated. As REALTORS®, we are viewed as trained professionals, who not only maintain a thorough understanding of the buying and selling process, but are also expected to be experienced in negotiating. We should be aware of the legalities and responsibilities outlined in all aspects of the contract. Having you help guide your client through the process will not only save your client time and money, but also ensure they have a higher chance of having a fair and balanced contract - not to mention, this is how we get paid!
 
Before our client signs any contract, it is important that you review the contract with them regardless of how many real estate transactions they "claim" they have completed. The review process is the optimal time to amend, delete, or add new components. The review process also ensures your client(s) understands his/her responsibilities to the contract, which you also need to manage. We should always ensure that the terms are to their satisfaction, and they understand these terms and their responsibility to these terms.
 
The main knowledge of managing the contract comes with the contingencies. I have a saying, "it's not a problem, until it's a problem". The main meaning of this is ALL contingency deadlines matter, otherwise they would not be in the contract. We all see agents not managing the contract properly, contingency timelines pass and they say, "it's no big deal", or, "we are working on it".

If you have a buyer or seller that has the desire to get out of the contract, missed contingencies are now a potential "problem". If you do not manage the contract properly, you are not providing Value to your client(s) that they expect and deserve.
 
The most common errors made in a contract are:

• Missing contingency deadlines.
• Not ensuring all parties' names and contract details are accurately spelled and properly listed.
• Property details - the property address, lot number and legal description.
• Purchase price and specific financing terms.
• Due diligence and contingency timelines.
• Signatures and initials in all the designated areas.

 The most common timelines that are not managed correctly are:

• Response time to an offer or counteroffer.
• Earnest Money – Received time and deposited time.
• Inspection.
• Appraisal.
• Title work (clear title).
• Surveys.
• Financing.
• Another sale contingency.
• Back-up offer contingency.
• Closing costs.
• Closing date.

The Most Common Reasons for a Failed Real Estate Contract:

• Poor communication.
• Poor management of the contract.

The Most Common Consequences of a Failed Real Estate Contract:

• Lawsuit for Breach of Contract – The buyer or seller can sue for breach of contract if either party does not follow-through with the agreed-upon terms. 
• Lawsuit for Specific Performance – A court order may be issued requiring the buyer or seller to complete the sale.
• Earnest money dispute.   

Manage the contract!  Don't let the contract manage you!