Contract Subjects

Contract SubjectsOk, anyone who has ever purchased or sold a home should be familiar with the concept of contract subjects. For those who have never heard the term, I will explain in more detail. During a home sale there are a number of negotiations that happen between the concerned parties. Sometimes they are detailed on paper if they are of enough importance, these are known as subjects. Subjects occur after the initial offer for the home is made when the buyer would like certain changes made to the home. Below we will explore some of the more typical subjects involved in real estate contracts.

By far the most common subject is “subject to the home passing an inspection.” This means that the buyer’s offer is subject to the home’s passing of a legitimate inspection by a verified and legal inspector. Therefore the buyer has the right to rescind the offer if the home does not pass the inspection. However, that leads us to further subjects. IF a home does not pass the inspection then the buyer may alter their subjects to incorporate the necessary repairs to ensure that the home does eventually pass. These will typically read some thing like “subject to the necessary repairs being made to the home at the cost of the buyer.” Now, usually the subject will go into more detail about the fixes that are necessary; but as we aren’t making an actual offer here the preceding statement is a bit of a blanket statement. Let’s use the example of a faulty roof on a home. The buyer has an inspector come in and do their thing. The report comes back saying that there are leaks in the roof and on that basis the home does not pass. The buyer can then make the subject of “upon completion of a new roof with warranty.” If the seller accepts this subject they are then responsible for the installation of the new roof and upon completion the sale can go ahead as outlined in the contract.

Sellers can also utilize subjects during the contract process to put rules or guidelines on the transaction. The most common of these is a subject to omit certain items from the sale of the home. For instance, the seller has just purchased an expensive custom range and grill and when they move they are planning to take it with them. Their subject will clearly state that in the sale of the home, the new range is not part and parcel of the deal. This kind of subject can also apply to window coverings, other appliances, or indeed anything that the seller wants to take with them, provided that it is agreed upon by both parties.

Pay close attention to the subjects in real estate contracts as they are of paramount importance. If there are any questions regarding the wording of a particular subject don’t hesitate to confer with your realtor as to exactly what it means. You should never agree to anything without knowing exactly what it refers to.