What is a Utah Real Estate Purchase Contract?

Understanding Real Estate Purchase Contracts in Utah
So what is a Real Estate Purchase Contract ("REPC")? A REPC is a contract between a buyer and seller that specifically governs the sale/purchase of real estate. This contract is filled with different terms, conditions, and contingencies that will ensure the transaction is completed or terminated, and rest assured , it is very important that every line of that contract is read and understood before putting pen to paper. The contract itself is broken up into sections including: select date for contract; purchase price; earnest money; title issues; title insurance; closing and possession; appraisal contingencies; and inspection contingencies. It is important that all of these sections are understood before agreeing to a REPC, as selling home/land is quite the permanent decision that is often irreversible and possibly quite costly.

Elements of Utah’s Real Estate Purchase Contracts

Utah’s real estate purchase contracts contain some standard components. Of course, a contract for purchase needs to identify the parties. As the buyer or seller, you will see the other party’s name identified within the contract. You will also find a legal description of the property that the buyer intends to purchase. Law requires that land be identified with certain specificity, and so describes the property in detail. It will typically begin with the county and state where the property is located. The description also needs to include the type of deed that applies to the property. The most common deeds in Utah are general warranty deeds, special warranty deeds, and quitclaim deeds. Each type of deed has a different effect on the ownership rights. A general warranty deed guarantees that the buyer gets clear title to the property with free of all issues. A special warranty deed offers similar protection, but only guarantees the title from the period in which the seller owned the land to the present time. A quitclaim deed transfers any rights that the seller has to the property, but doesn’t make any promises about the rights’ quality or what rights the seller actually has.
The purchase price for the property is another standard component to real estate contracts in Utah. The purchase price is usually identified within an "offer" section in the contract. Also included in this section is how the purchaser will pay for the property. For instance, does the purchaser intend to pay cash? Is it contingent upon the purchaser obtaining a loan? Is so, then there may be specific financing contingencies in the contract relating to the buyer’s ability to make the purchase. Finally, the date the property will close is also typically included in a contract. This is commonly referred to as the closing date. Keep in mind that other aspects may require negotiation in the contract, depending on the situation. For instance, what if the buyer or owner of the property needs to remain in the home after closing? In that situation, the buyer would want to negotiate a rent-back agreement with the sellers. The rent-back agreement allows the seller to stay in the property for an established amount of time for payment of rent. The new buyers retain the title during the rent back period, but the seller can live in the property as if the ownership weren’t transferred. Rent back agreements are often lumped into the contract.

Utah’s Legal Requirements for a Purchase Contract

In order for a real estate purchase contract to be a legally binding document in Utah, it must meet all state requirements. Contracts that do not satisfy these requirements are not legally enforceable. Utah recognizes four elements that must be present in a legally enforceable contract:
Contract parties must be competent. Regarding a natural person, the parties must be at least 18 years of age to be able to enter into a valid contract. A person under the age of 18 cannot sign or be held to a real estate contract. In cases where a person is deaf or mute, contracts with that person are enforceable provided that they contain a written clause specific to the deaf/mute.
Contract parties (whether a natural person or a business entity) must have the legal capacity to contract. The contract parties must possess the legal authority to enter into an enforceable residential real estate contract. The person must be authorized by the entity to enter the contract. Where the parties to the contract are a business entity, the persons signing the contract on behalf of the entity must have legal authority to do so.
The subject matter of the contract must be legal. In Utah, if any of the provisions of a real estate purchase contract are illegal, the entire contract may be voided. The sale of a building that has a dangerous defect may constitute a legal subject mater for the purpose of voiding the contract.
The contract must be formed in the interest of the public (rather than being personal in nature). Such interests might include the public’s demand for stability regarding real estate. For example, a valid real estate purchase contract in Utah may require that the buyer be in the trade or dealing, or otherwise show how they are financially interested in the transaction such as in the case of a contract entered into by a stockholder of a corporation.
If you are entering into a real estate purchase contract, be sure to carefully review it to ensure that it contains all of the necessary elements for a valid and legally enforceable contract.

Common Utah Purchase Contract Contingencies

Purchase contracts in Utah generally contain many mutually agreed to conditions which must be satisfied or waived before the buyer is required to complete the purchase. These conditions are referred to as "contingencies" and are commonly listed within the contract, along with dates by which each contingency must be satisfied. If the buyer included the appropriate contingencies to ensure that it is not left with a contract to purchase property which may not be as represented, the buyer will generally have the right to terminate the contract if the conditions of each contingency are not met. Some of these contingencies are common and others are more unique. Examples of typical contingencies include: inspections, obtaining a loan commitment, approval and review the final subdivision plat and other documents, reviewing copies of existing contracts for assignments of rents, satisfaction of conditions for receiving financing proceeds, and receipt of homeowner or condo association documents.

Altering a Utah Real Estate Contract

Utah Purchase contracts are legal contracts, so any changes that need to be made would need to be addressed in the context of an amendment to the purchase contract. As a period update or simply an addendum is not legally binding, both the buyer and seller need to approve any changes to the purchase contract to make them binding. Amendments to the purchase contract are similar to the purchase contracts, in that they also need to be in writing, signed by both parties, and notarized.
In a situation where a builder is involved, often the real estate agent can take care of writing the amendment . The parties still need to sign the amendment if they agree to the contents. However, a builder may also have their own in-house legal counsel to draft the amendments to the contract. In that regard, the agent, here, is most helpful in determining who the best person to speak to about contract amendments would be for their specific client.
If there is a dispute between parties regarding the amendment, it is most often advisable to seek out mediation or dispute resolution, since the cost of litigation is prohibitive for most persons. Because the statute of limitations for real estate contracts is six years, it is crucial to take note of that time limit.

Common Risks and Mistakes to Avoid

The real estate purchase contract is the first step in a long and complex process of buying or selling a home. The information in this section describes ways to avoid common pitfalls that both buyers and sellers often face following the acceptance of the contract. Being aware of some of these shortcomings may save time and money.
Possession. Contrary to popular belief, possession of the property is NOT the same as delivery of possession.
Mistake: The buyer assumes possession on a day that’s not the day agreed upon in the contract.
Mistake: The seller gives the buyer possession of the property on a day that’s not the day agreed upon in the contract.
Solution: Specify and agree upon the possession date early and stick with it. Be sure that all agents understand which day possession is to occur so there is no confusion.
Lender Approval. Many buyers and sellers don’t bother to specify who is responsible for obtaining lender approval in the sales contract.
Mistake: The buyer fails to get financing approval with a lender before the closing date.
Mistake: The seller fails to call the closing and loan agent for forgiveness of an existing loan.
Solution: Be clear about who is to obtain lender approval and whose responsibility it is to pay off an existing loan so that no one is disappointed before closing.
Inspection and Appraisal. Either party can cause problems by failing to address certain issues.
Mistake: The buyer fails to allow time in the contract for an inspection and appraisal to be done.
Solution: The buyer should be aware of any inspection that needs to be done and do so early in the process. The buyer may be responsible for the cost of these reports, so ask the agent about this ahead of time.
Closing. Waiting until closing to resolve issues can be a waste of time if there are problems.
Mistake: The buyer wants trash cans emptied, a closet door added, or some other issue addressed, but asks the seller to do this only a few days before closing.
Solution. These should be addressed as soon as they become known and, whenever possible, before the date for contract negotiation arrives.

Utah Real Estate Purchase Contract FAQs

We’ve got your back! So as you move forward with the purchase of your new Utah home, be sure to get familiar will common contract questions.
FOR EXAMPLE…
Do we have to use a real estate lawyer to buy a property?
No, though it can be beneficial. The closing process typically doesn’t require the expertise of a real estate attorney, but if you feel more comfortable with one present, you can hire an attorney for the closing or any other service you need. It’s optional, but helpful to some. We suggest you find a lawyer to review the contract before you sign it.
Can someone change their mind after signing a contract?
When you sign a contract to buy a house in Utah, you are making a legally binding agreement with the seller. A seller can’t simply change their mind about selling to you afterward (unless there is some other legal reason). You have a period of time to inspect the property and negotiate corrections to the contract as needed.
Will the seller be using a different contract than the buyer?
Most likely no. In Utah , sellers and buyers use the same real estate purchase contract from the Utah Association of REALTORS® (or UAR) as the standard agreement for buying and selling homes. While some sellers and buyers may choose to use their own real estate lawyers and get custom contracts written, most sales are finalized using the UAR contract.
What is the buyer’s earnest money?
An earnest money deposit is money paid to the seller before closing the sale of a home. It’s a way to show the seller that you are serious about completing this sale. This is a negotiable term and the amount can vary widely, but 1% to 3% is common. If the sale closes, this money goes toward the buyer’s down payment. If the sale does not close, the buyer will either forfeit the funds or the buyer may have the right to recover them.
What’s the difference between earnest money and the down payment?
An earnest money deposit is paid at the time a purchase offer is made. It’s money paid to a seller and held in escrow to show the buyer’s commitment to buying the property. A down payment on the other hand, is paid to a lender towards the purchase of a home and typically occurs at the closing of the purchase sale.