Looking for a Size 47 1/2

How is drafting a real estate contract — or almost any contract, for that matter — like picking a men’s suit?

In both cases, the usual starting point is to select the closest-fitting, existing garment — er, legal boilerplate — you can find.

Step #2:  altering (“customizing”) it to fit your client’s needs and circumstances.

Selection Process

Which contract to use usually isn’t an issue:  there’s only one version of the Arbitration Addendum, one version of the Inspection Addendum,  etc.

And, it’s usually apparent when a document does or doesn’t apply (for example, the “As Is” Addendum).

However, there are multiple versions of the standard Purchase Agreement (“PA”), depending on whether the property is residential, commercial, raw land, etc.

And whether it’s new or existing construction. 

In-Between Sizes

If the property is the former, the standard PA applies; if it’s to-be-built, a “New Construction” Purchase Agreement is appropriate.

But what about new construction that’s  . . . already constructed?

By then, many of the clauses in the New Construction PA are already moot or superseded.

That includes sections addressing construction timetable; blueprints and adherence to same; change orders; client input on finishes; and various other mid-process details.

Drafting Principle:  Less is More

Meanwhile, many other details pertaining to new construction are already dealt with outside the Purchase Agreement.

For example, in Minnesota, new home Buyers are automatically protected by a 1-year, 2-year, and 10-year warranty covering the home’s general condition, HVAC, and major structural issues, respectively.

Those rights are statutory, not contractual.

Similarly, the closers representing the Buyer and Seller make sure that the builder delivers such items as a sworn construction statement, Certificate of Occupancy, and lien waivers.

That’s simply part of making sure that the Buyer is getting good, clear title to a completed home.

Best Fit

So, taking into account the foregoing, which document — the standard Purchase Agreement or the New Construction PA — is a better choice for an already-built new home?

The former, because it has the best initial fit, and needs the least tailoring.

P.S.:  Legal boilerplate gets a bad rap; in the vast majority of cases, it’s actually a good thing (as Martha Stewart would say).

As a former corporate attorney, I should know.  

See also,  “Legal Drafting Tips for Realtors“; “Foreclosure Headache #7 (and #9, #17, #22, etc.).”

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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