How Binding Is a Real Estate Contract?

by Jann Seal
A real estate contract is  binding when both parties sign the document.

A real estate purchase agreement goes through a specific process before it becomes binding. Seller and buyer agree to a price and additional terms. The last party to sign the contract ratifies it with his signature, but only when it’s delivered to the other party is it considered binding. Many contingencies are built into a real estate contract, and it’s during this contingency period that many transactions fall apart. What’s at stake is the deposit that accompanied the agreement, and its return to the buyer intact. Civil litigation can also be pursued when a binding real estate contract fails to conclude.

The Offer

A buyer presents an offer to a seller. The seller agrees to all the terms presented, accepts the deposit that accompanies the offer and signs the purchase contract. When the contract is returned to the buyer it is considered a binding contract. A counter offer is considered a new offer, invalidating any and all previous contracts. The delivered contract must be written, signed and include the legal names of the parties involved in the transaction and the legal description of the property in order to be binding.


A binding contract includes consideration -- a monetary deposit, interest or value attached to it in order to make it binding. In real estate, that consideration is usually the deposit attached to the offer. Once the contract is in play, the ownership of the deposit is dependent on all parties performing according to the terms of the agreement.

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While a contract to purchase is binding, contingencies can lead to the transaction falling apart, through fault or no fault of either party. If a party to the sale fails to meet his contractual obligations as outlined in the contingencies, or if the property fails to meet the expectations of the buyer within the contractually stated parameters, the transaction can conclude and the deposit will be returned to the appropriate party.

Civil Litigation

When either party doesn’t meet his contractual obligations and pulls out of the transaction without justification, the deposit may be forfeited and turned over to the injured party. Civil litigation based on contract law can ensue.

About the Author

Jann Seal is published in magazines throughout the country and is noted for her design and decor articles and celebrity *in-home* interviews. An English degree from the University of Maryland and extensive travels and relocations to other countries have added to her decorating insight.

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