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A real estate contract

At what point and to what extent does it become binding?

 

STUDENT PAPER

By Alix Sion

SKEMA Business School

Paris, France

 


 
ABSTRACT

The purchasing process in the real estate world can be very complex for both the buyer and the seller of the property. Both can be reluctant to signing the contract in regards to the level to which it is binding, so it is important to be informed about the different steps of the process and the level to which they are binding to one or both parties.

We will here review all eleven steps of the real estate purchasing process and determine what contingencies can be found at which step. We will then deduct from this analysis the level to which each step is binding and create a ranking of the steps.

This will lead to the resolution of our problem which is to determine at what point and to which extend a real estate contract becomes legally binding.

Key words: Contract; real estate; legal; binding; offer; seller; buyer; contingency; dispute

INTRODUCTION

When individuals are asked about their life goals, a very common response is to “buy a house”. Nearly everyone will be concerned by this situation at one point in their life and will have to look into the procedure of doing so. On the other hand, if you own a property and wish to sell it you will also have to inform yourself about those procedures to conclude a deal with a potential buyer. The real estate market is enormous and concerns everyone; in the United States, in 2015, 5,250,000 existing homes were sold as well as 510,000 newly constructed ones.

Once a buyer and a seller have come together to conclude a deal, buyers can agree verbally with the sellers on their decision to purchase or not. They will then proceed to sign a real estate contract.

But can they change their mind after the contract is signed? How binding is the signed contract and at what stage of the buying procedure does the action of the house being sold from the seller to the buyer become official? Can the buyer retract from the contract and until what stage? What about the seller?

It can be interesting to look into this situation to try and determine exactly at what point a real estate contract becomes binding and to which level. We will examine the contingencies decided by the attorneys and the contract’s details that can prevent a party to be unable to retract from the contract, and we will reflect on the reasons a buyer and a seller each have to make the contract more or less easy to cancel.

This will bring us to the resolution of our problem which is to determine at what point and to which extend does a real estate contract become legally binding?

More…

To read entire paper, click here

 

Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director [email protected].

How to cite this paper: Sion, A. (2018). A real estate contract: At what point and to what extent does it become binding? PM World Journal, Volume VII, Issue VIII – August.  Available online at https://pmworldjournal.net/wp-content/uploads/2018/08/pmwj73-Aug2018-Sion-when-does-real-estate-contract-become-binding.pdf

 



About the Author


Alix Sion

Paris, France

 

 

 

Alix Sion is a MSc student studying Project and Programme Managament and Business Development in the Paris campus of SKEMA business school. Born in France, she lived three years in Chester, England and three years in Manila in The Philippines during her childhood, before moving back to France at age 11. Once she obtained her baccalauréat, she then went on to study a double degree in Global Business. After two years of studies in Dublin City University and two years in NEOMA Reims in France she graduated with first class honours in 2017.

During her two years in NEOMA, she was vice president of the student union and contributed to the organization of a business weekend reuniting more than 500 students from many different countries. She was very passionate about it and this has contributed to her desire to spend her life engaging in temporary projects.

Once she has obtained her masters degree, she will go on to start her career abroad, possibly in Ireland or Switzerland where her family currently lives.