When a person starts the home buying journey it’s often an emotional experience. They imagine themselves living in the ideal space where they can be completely relaxed. They envision how their life will improve and the things they will do to add their personal touch. They think about how they’ll celebrate milestones with loved ones.
All the paperwork that’s involved is the last thing on their minds.
In Georgia, like all other states, a contract is needed to enter into a contractual agreement to buy or sell a property. The Georgia statute of Frauds requires that certain key details of a real estate sale be in writing to be considered “definite and complete”. These details include:
Name of the seller
Name of the buyer
The agreement to purchase/sell
A legal description of the property
Agreed upon purchase price
Terms of payment
Conditional clauses
Brokerage fees/compensation
Closing date
Signatures
Technically, there are dozens of Georgia real estate contracts and forms. However, only a fraction will apply to any given sale.
Whether you’re on the selling side or buying side, it’s in your best interest to understand how Georgia real estate law affects contractual agreements and the types of legal contracts that are used for a purchase. It’s something that needs to be understood upfront because the first legal contract actually needs to be signed before an offer is submitted.
Seller Listing Agreement
Unless a home is for sale by owner (FSBO), the first legally binding contract will be a seller listing agreement. Georgia real estate agents use two types of agreements: an Exclusive Seller Listing Agreement and a Non-Exclusive Seller Listing Agreement.
A seller listing agreement is basically a contract of employment. It establishes that the seller (homeowner) is hiring the brokerage to list their home for sale in exchange for a commission or a fee.
With an Exclusive Seller Listing Agreement, the seller/homeowner is giving just one broker the ability to list their property, and they cannot enter into a listing agreement with another broker during the period of the agreement. A Non-Exclusive Seller Listing Agreement enables a seller to use more than one broker and whichever broker produces a buyer gets the commission.
Georgia law requires that all seller listing agreements be in writing. If an Exclusive Seller Listing Agreement is used there must also be a termination date.
Other points on the Seller Listing Agreement include:
Statement of the listing agreement
Property identification
The legal description of the property
List price
Negotiation approval
MLS marketing
Commission
Listing period
Protected period
Types of agency relationships offered by the broker
Special circumstances for listing the property (divorce, bankruptcy, etc.)
Seller default declaration
Seller’s property disclosure statement requirement
Limits on broker’s authority, responsibility and liability
Seller’s signature for acceptance
There are also a number of miscellaneous items and explanations for the points above. Additional brochures or exhibits may also be attached to the agreement.
The Seller Listing Agreement is important beyond establishing who gets the commission because it also establishes the relationship between the brokerage/agent and seller. Georgia’s Brokerage Relationships in Real Estate Transactions Act (BRRETA) requires that agents “disclose their agency and non-agency relationships to the parties to the real estate contract.” Georgia Real Estate Commission (GREC) rules also dictate that agents must disclose in writing who is paying their commission, which is clear-cut when you have a Seller Listing Agreement.
Buyer Broker Agreement
On the other side of the deal, there is the buyer broker. They too want to ensure that their hard work is rewarded by entering into a contractual agreement with their client that’s searching for a new home. Again, there are exclusive and non-exclusive buyer broker agreements.
Like the seller side, an Exclusive Buyer Broker Agreement means that the buyer agrees to work with only one agent to purchase a home. The buyer can’t enlist the help of another agent until the exclusive agreement expires or is terminated. Therefore, the agreement must include an expiration date.
The Non-Exclusive Buyer Broker Agreement allows a buyer to establish a relationship with more than one brokerage/agent simultaneously. Most buyer agents only use the Exclusive Buyer Broker Agreement because without it there’s a lot less certainty their work will result in a commission.
Items that are on the Buyer Broker Agreement include:
Statement of brokerage agreement
Independent contractor relationship
Broker’s duties to the buyer
Buyer’s duties
Retainer fees
Limits on broker’s authority and responsibility
Commission fees
Extension period
Disclosures
Broker’s policy on agency
Dual agency disclosure
Notices
Special stipulations
Buyer’s signature for acceptance
Either of the agreements will establish representation, which is important. Georgia Law, code section 10-6A-1A states that a broker cannot legally represent a buyer and draw up an offer without having one of the two agreements in place. Having representation is beneficial for buyers because they will have an agent that is bound by law to look out for their best interest, and it won’t cost a dime because the seller pays the commission. Another benefit for buyers is that entering into either agreement eliminates the possibility of dual agency.
Georgia Residential Purchase and Sale Agreement
This is by far the most important legal contract when you’re buying a single-family home. The Georgia Residential Purchase and Sale Agreement covers everything that is required for a contract to be considered complete and enforceable.
The GREC has an official Residential Purchase and Sale Agreement that’s available to licensed agents to submit an offer and execute a contract, but it’s not required to be used. As long as a written agreement covers all the necessary points it’s a complete contract regardless of whether or not it comes from the Commission.
The GREC updates its Residential Purchase and Sale Agreement regularly, but here’s a rundown of what the contract contains:
Key Terms and Conditions
Purchase and sale agreement
Property identification
Legal description
Whether there’s an existing survey
Purchase price
Seller contribution to closing costs
Closing date
Holder of earnest money
Earnest money amount, method of payment and date for submitting
Due diligence period
Option payment details
Lead-based paint disclaimer
Brokerage relationships in the transaction
Time limit for the offer
Other Terms and Conditions
Notices
Default specifications
Risk of damage to property disclaimer
Exhibits and addenda
Special stipulations
Acceptance and Contact Information
Buyer contact information
Seller contact information
Buyer signature
Seller signature
Selling broker/licensee contact information
Listing broker/licensee contact information
Binding agreement date
There are variations of this legal contract for different types of property. For example, if you were purchasing a brand new home you would use the New Construction Purchase and Sale Agreement.
*Note About Offer to Purchase
An offer to purchase in Georgia is not necessarily a legally binding contract. It’s just the first step towards a binding contract. It’s considered a conditional promise, not a legal contract.
The offer must be accepted for it to become a binding agreement. Should the seller not accept the offer, counter the offer or the buyer revoke the offer it would be off the table and there would be no sale. Usually, the seller will use the Counteroffer to or Modification of the Unaccepted Original Offer form to amend the offer, and if the buyer accepts the changes then it’s considered an agreement.
Amendment to Agreement
It’s not uncommon for the details of a real estate deal to change slightly after the original agreement is signed. There could be an issue that’s discovered during the inspection or the date may need to change because the lender needs a few more days.
When a change needs to be made an Amendment to Agreement form is used. It spells out what is changing and both parties must sign and date the agreement for the change to legally become part of the sale.
Georgia has a generic Amendment to Agreement contract but there are also nine specific amendments for common changes. For example, if the appraisal came back $5,000 under the offer price and the seller agreed to drop it so financing can go through an Amendment to Sales Price contract could be used.
Less Common Real Estate Contracts in Georgia
The contracts above are some of the regular paperwork that almost always accompanies a home sale. However, that’s far from all the contracts that could be involved. Below are some legal contracts you may come across but are not commonly part of a real estate purchase:
Temporary Occupancy Agreement for Seller After Closing Exhibit
Temporary Occupancy Agreement for Buyer Before Closing Exhibit
Option Agreement
Personal Property Agreement
Arbitration/Mediation Agreement
Sale or Lease of Buyer’s Property Contingency Exhibit
Special Stipulations
Buying a home in Georgia is a lot like buying a home in other states - there’s a lot of paperwork between the offer and closing. Those contracts might seem like overkill at times, but they’re what ultimately make a home sale possible and they ensure everyone involved is legally covered. Ready to start your Georgia real estate career?