Definition:
A ratified sales contract is a legally binding agreement between a buyer and a seller in which both parties have signed and agreed to all terms of a real estate transaction.
Example:
Maria makes an offer to buy Jacob’s house for $350,000. Jacob reviews the offer, agrees to the price, closing date, and other terms, and signs the contract. Once Maria receives the signed agreement back, the sales contract becomes ratified, legally obligating both Maria and Jacob to follow through with the transaction, assuming all conditions are met.
Explanation:
A ratified sales contract occurs once both buyer and seller have fully agreed to all terms in writing. At this stage, both parties become legally obligated to complete the transaction unless specific conditions, called contingencies (such as inspection or financing conditions), are not fulfilled.
Typical components of a ratified sales contract include:
- Purchase price
- Closing date
- Earnest money deposit
- Inspection, appraisal, and financing contingencies
- Seller disclosures about property condition
Once ratified, the contract enters the escrow period, where both sides work toward fulfilling their obligations—such as the buyer securing financing, conducting inspections, and the seller addressing necessary repairs or disclosures—before finalizing the sale at closing.
Why is Ratified Sales Contract Important in Real Estate Transactions?
A ratified sales contract is crucial because it provides clarity and protection for both home buyers and sellers. For buyers, it secures the agreed-upon purchase terms, ensuring they have the opportunity to thoroughly inspect and secure financing without the risk of losing the home to another buyer. For sellers, a ratified contract provides assurance the buyer is serious and obligated to complete the transaction, allowing sellers to plan their next steps confidently. Overall, a ratified sales contract helps ensure transparency, reduces risk and provides structure throughout the real estate transaction.