TL;DR

• Real estate contracts define the terms of property transactions, ensuring compliance and risk mitigation
• Essential elements include parties, property details, purchase price, and contingencies
• Common contract types include purchase agreements, lease agreements, and listing agreements
• Effective contract management prevents legal disputes and financial losses
• Contract management tools streamline drafting, negotiation, and execution

Real estate contracts are the backbone of every property deal. Get them wrong, and a simple transaction can spiral into costly disputes. These agreements act as your legal armor: they define who pays what, when keys change hands, and how risks are managed.

For in-house counsel, clarity is non-negotiable. A vague clause or missed deadline can turn a straightforward deal into a legal nightmare. This guide strips away the complexity, breaking down must-know terms, hidden risks, and practical strategies to safeguard your company. Whether you’re leasing office space or closing a multimillion-dollar sale, consider this your roadmap to airtight contracts. You will also get a free template to start strong.

What are real estate contracts?

Real estate contracts outline who is responsible for what, when, and under what conditions in a property transaction. Whether it’s a purchase agreement, lease, or investment deal, these contracts ensure legal compliance, define obligations and prevent disputes.

For example, a basic home purchase agreement includes:

• Purchase price: agreed sale amount
• Payment terms: lump sum, installments, or financing details
• Property condition: any disclosures or required repairs
• Closing date: when ownership officially transfers

And since oral agreements in real estate are a bad idea, these contracts must be in writing.

Sample real estate contract

A real estate contract can seem complex, full of legal slang and lengthy clauses, and enough fine print to make anyone’s head spin. 

How to get the template:

• Click the link below to go to the download page
• Fill out the form to help us understand your needs
• Submit the form to receive the template in your inbox, ready to use and customize

Note: While this template provides a good framework to start, it is critical to tailor the details to your specific needs.

Also read: Creating a contract using a template in SpotDraft

Where do real estate contracts apply?

These aren’t just for home sales, but cover a broad range of corporate transactions, including:

• Property Sales: Residential and commercial transactions
• Lease agreements: Long-term corporate leases or short-term rentals
• Development and construction: Agreement for property improvements and new builds
• Joint ventures and investments: REITs, co-investments, and structured deals
• Wholesale and flipping: Assigning contract rights in investment transactions

Key elements of real estate contracts

A real estate contract is only as strong as its details. A well-structured agreement ensures both parties are protected throughout the transaction.

As in-house counsel, the last thing you need is a deal falling apart over vague terms or missing clauses. Your job is to catch the gaps, clarify obligations, and make sure the contract actually holds up when it matters.

Key elements to focus on while drafting a contract:

#1 Accurate identification of parties for enforceability

If the contract doesn’t correctly name the buyer and seller, it’s already on shaky ground. Using the wrong entity name say, an LLC’s trade name instead of its registered legal name, can render the contract unenforceable.

• Use full legal names as they appear in government records 
• In case a corporate entity is involved, specify who has signing authority

#2 Clear property description to avoid disputes

A vague property description is a lawsuit waiting to happen. Boundary disputes, ownership confusion, or missing details on fixtures, zoning, and improvements can all create post-closing headaches.

• Use the official legal description from property deeds or tax records—not just the street address
• Specify exact property boundaries (including easements, zoning classifications, and land use restrictions)
• List any included fixtures or improvements (e.g., built-in appliances, HVAC systems)

#3 Defined purchase price and payment terms

Money disputes are one of the biggest deal-breakers in real estate transactions. Unclear payment terms can lead to financing failures, closing delays, or unexpected costs.

• Define the purchase price, deposit amount, and payment structure
• Outline who covers closing costs, taxes, and fees
• If seller financing is involved, specify the loan terms, interest rate, and repayment schedule

#4 Contingencies to protect both parties

A contingency is a get-out-of-the-contract-free card, if certain conditions aren’t met. Without contingencies, buyers could get trapped in a bad deal, or sellers could face unnecessary delays.

Common contingencies:

• Financing contingency: Buyers can back out if they can’t secure a mortgage
• Inspection contingency: The deal depends on a satisfactory property inspection
• Title contingency: Ensures the seller provides a clear, dispute-free title
• Zoning contingency: Confirms the property meets zoning requirements

#5 Closing date and possession terms

A poorly defined closing date or vague possession terms can lead to chaos on moving day. Buyers expect to take ownership immediately, but sellers might need extra time to vacate.

• Specify the exact closing date and any flexibility allowed
• Define when the buyer takes possession (immediately vs. post-closing occupancy)
• If the seller needs extra time, structure a rent-back agreement

#6 Earnest money terms to secure buyer commitment

Earnest money is a good faith deposit that shows the buyer is serious about the purchase. But if the contract doesn’t clarify how it’s handled, disputes can arise if the deal falls through.

• Specify how much earnest money is required and who holds it (e.g., escrow)
• Define when and under what conditions the deposit is refunded or forfeited

#6 Proper signatures for legal execution

A real estate contract isn’t enforceable without the right signatures. If the wrong person signs, or someone without authority, there is a legal disaster waiting to happen.

• Ensure all signers have legal authority (e.g., corporate officers, power of attorney)
• Use e-signature platforms for compliance and tracking (e.g., SpotDraft, DocuSign, Adobe Sign)

Also read: Everything You Need to Know About Purchase and Sale Agreements

The importance of real estate contracts

Real estate transactions come with financial, legal, and regulatory risks. A well-drafted contract ensures compliance, risk mitigation, and enforceability, protecting all parties involved. A vague or incomplete agreement? That’s an open invitation for disputes, penalties, or even a canceled transaction.

#1 Compliance failures can void your contract

Real estate contracts must align with state, federal, and local laws covering zoning, environmental regulations, fair housing, and corporate governance. Non-compliance can lead to penalties, legal disputes, or contract invalidation.

Key compliance areas:

• Zoning and land use: Ensure the property’s intended use follows local regulations
• Environmental laws: Address hazardous materials, water rights, and pollution controls
• Corporate real estate compliance: Align contracts with tax laws and liability protections

#2 Risk allocation defines liability and limits losses

Real estate contracts must account for risks, including market shifts, construction delays, environmental hazards, and force majeure events.

Key clauses to mitigate risk:

• Indemnity clause: Protects one party from financial loss if the other party fails to meet obligations
• Force majeure clause: Excuses performance if an event beyond control (e.g., hurricane, war, pandemic) disrupts obligations.
• Liability cap: Limits financial exposure in case of contract breaches

#3 Real estate in M&A: hidden liabilities can wreck deals

In corporate mergers and acquisitions, real estate assets often carry hidden risks. Failing to conduct due diligence can result in compliance issues, financial losses, or legal disputes.

Crucial M&A real estate checks:

• Title and ownership review: Ensure the selling entity legally owns the property and can transfer it
• Lease agreements and tenant rights: Address existing lease obligations and tenant agreements
• Environmental and zoning compliance: Confirm the property meets legal requirements 
• Financial liabilities and encumbrances: Identify unpaid debts, liens, or legal claims

#4 Contract protections prevent real estate fraud

Real estate fraud is more common than you might think. A weak contract can expose buyers to financial loss and legal disputes.

Common fraud risks:

• Title fraud: Someone sells a property they don’t legally own
• Undisclosed encumbrances: The seller hides liens, unpaid taxes, or zoning restrictions
• Forgery and misrepresentation: Falsified documents or fake property ownership claims

Types of real estate contracts

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Real estate transactions aren’t one-size-fits-all. Different deals require different contracts, each designed to outline responsibilities, protect interests, and keep the deal legally sound. 

Here’s a breakdown of the most common types of real estate contracts:

#1 Purchase agreements

A purchase agreement is a go-to contract when a buyer agrees to purchase property from a seller. It sets out the key details of the transaction and ensures both parties understand their obligations before closing.

Key elements in a purchase agreement:

• Property Description: Defines what’s being sold
• Purchase price and payment terms: Includes financing, earnest money, and down payment details
• Contingencies: Protects both parties (e.g., financing, inspections, title clearance)
• Closing date: Specifies when ownership officially transfers
• Dispute resolution: Outlines what happens if a party breaches the contract

Also read: Everything You Need to Know About Purchase and Sale Agreements (+ Free Template)

#2 Lease Agreements

A lease agreement establishes terms between a landlord and tenant, allowing the tenant to occupy a property in exchange for rent. 

Components of a lease agreement:

• Rent amount and payment schedule: How much rent is due and when 
• Lease Duration: Short-term, long-term, or renewable
• Security deposit: For potential damages or unpaid rent
• Maintenance responsibilities: Who handles repairs and upkeep
• Termination and renewal terms: Conditions for ending or renewing the lease

Also read: How to Review Leasing Contracts: A Comprehensive Guide

#3 Option Contracts

This contract grants the buyer exclusive rights to purchase the property later, with no obligation to do so. Meanwhile, the seller is restricted from selling to others during the option period.

Parts of an option contract

• Option fee: The buyer pays an upfront fee to reserve the right to buy later
• Option period: Defines how long the buyer has to decide
• Purchase price agreement: The price may be fixed or negotiated later
• Terms of Execution: Outlines how and when the option can be exercised

Also read: 7 Types of Sales Contracts + Best Practices for Executing Them

#4 Wholesale contracts

A wholesale real estate contract lets an investor secure a property at a set price and assign the contract to another buyer for a profit, without ever owning the property.

Elements of wholesale contracts:

• Assignment clause: Allows the contract to be transferred to another buyer
• Purchase price agreement: The wholesaler locks in a low price with the seller
• Earnest money requirement: Ensures the wholesaler is committed
• Closing terms: Specifies when and how the final transaction will occur

Also read: 10 Types of Commercial Contracts Your Team Must Know

Contingencies in real estate contracts

Contingency clauses act as safety nets, allowing parties to back out or renegotiate if certain conditions aren’t met.

Key contingencies:

• Title contingency: Ensures the seller has a clear title, free of liens or disputes, before closing‍
• Financing contingency: Protects buyers from being forced to close if they fail to secure mortgage approval‍
• Environmental contingency: Allows buyers to withdraw if environmental hazards or regulatory violations are discovered
• ‍Force majeure clause: Excuses delays or cancellations due to uncontrollable events like natural disasters or government actions

Also read: What is a Contingent Contract

Negotiating terms in a real estate contract

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"Negotiation is 90% preparation, 10% talking."

~ Sterling Miller, CEO and Senior Counsel, Hilgers Graben PLLC
Ten Things: Business Skills All In-House Lawyers Must Know

Real estate deals come with high financial stakes, and getting the terms right can mean the difference between a smooth transaction and a costly dispute. Whether buying, selling, or leasing, negotiation is key to securing a fair deal for all parties involved.

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Some of the most commonly negotiated terms in real estate contracts include:

• Price: In real estate, everything has a price, but rarely a final one. Buyers negotiate based on market trends and property value, while sellers aim for top-dollar

• Repairs: Inspections reveal surprises, and buyers often demand fixes or price cuts. Sellers? They’d rather throw in a repair credit than pick up a hammer

• Closing costs: Title insurance, attorney fees, and taxes add up fast. Buyers try to shift some costs, while sellers push back

• Contingencies: The safety net. Financing, inspections, and appraisals are often deal-breakers up for negotiation

• Possession terms: Buyers want the keys at closing, while sellers might need time to pack. Enter rent-back agreements and move-in negotiations

• Earnest money deposit: The buyer’s good-faith deposit. How much, when it’s refundable, and under what conditions? Always a point of discussion

Also read: Mastering the Art of Contract Negotiation: Strategies for Success

How to manage real estate contracts efficiently

Real estate contracts come with high-value transactions, multiple stakeholders, and tight deadlines. A single missed deadline, an overlooked clause, or a lost document can lead to legal disputes, financial losses, or even failed deals.

Best practices for managing real estate contracts

#1 Use contract management software – automate tracking, approvals, and compliance

Real estate contracts go through multiple revisions, approvals, and legal reviews. Managing this process manually? That’s a recipe for errors, lost documents, and missed deadlines.

Why it matters

• Cuts admin workload and speeds up approvals
• Ensures legal and regulatory compliance
• Tracks contract versions, approvals, and obligations in one place

“Contract access to unnecessary stakeholders always puts the business at risk. In fact, organizations end up paying lumpsum amounts or huge liabilities in the wake of security breaches.”

~ Supin Prem, Senior Manager, Legal Tech, SpotDraft

Also read: 8 Top Contract Management Software Platforms

#2 Keep digital records – store contracts securely to avoid disputes

Physical contracts can get lost, damaged, or altered, leading to legal and financial risks. A digital repository keeps agreements secure, organized, and accessible.

Importance of digital storage:

• Prevents loss or damage
• Enables quick access to documents
• Ensures compliance with storage regulations

#3 Track deadlines – missing deadlines can nullify deals

Real estate contracts have strict deadlines for financing, inspections, contingencies, and closing dates. 

Missing a deadline can lead to:

• Loss of deposit 
• Breach of contract claims
• Unintended contract renewals

AI tools can be great, if and when properly used. AI will not replace lawyers. But it might make obsolete those lawyers who are not able to adapt and use modern tools like AI in their practice where and when appropriate. Keep these caveats in mind, but experiment and practice using various AI tools in the manners listed above. The more you try it, the more comfortable you will become at using it.

~Brian Heller, Tech Deal Lawyer (SaaS/Cloud, AI, Advertising, Licensing, etc.) with 20+ yrs experience10 Ways Lawyers Should Use AI & 3 Ways They Should NOT

Also read: Online Contracts: All You Need To Know

Getting real estate contracts right

Real estate contracts aren’t just documents to sign and file away. They are risk management tools that keep transactions compliant and on track. 

But manual management? That’s a fast track to missed deadlines, compliance risks, and costly errors.

SpotDraft’s contract management platform makes it easy to stay in control:

• Automated deadline tracking: Never miss key dates
• Secure digital storage: Keep all contracts, organized and accessible
• AI-powered analysis: Identify risks and compliance gaps in seconds
• E-signature and approval automation: Speed up deal closures

Real estate deals moves fast, but legal risks can linger long after closing. With SpotDraft, you close deals smarter, faster, and with zero guesswork.

FAQs about real estate contracts

1. Can a buyer pull out after signing a real estate contract?

Yes, if contingency clauses permit or both parties agree.

2. What is the most common real estate contract?

A purchase agreement is the most common real estate contract, which outlines the terms of buying and selling property.

3. What should a real estate contract include?

A real estate contract should include buyer and seller details, property description, purchase price, contingencies, payment terms, closing date, and signatures to ensure it is valid and enforceable.