Arkansas Real Estate Contract: Purchase & Sale Agreement In AR

Every real estate transaction in Arkansas requires formal contracts. Whether it's a transaction as straightforward as a short-term rental or as complex as a joint venture, agreements are always necessary. Therefore, anyone involved in real estate—whether as a buyer or someone who already knows how to wholesale real estate in Arkansas—must understand Arkansas real estate contracts. Read on to learn what Arkansas real estate contracts entail, the various sections they should include, and the different types available to empower you to handle this critical paperwork like a pro. To get things started, we’ll cover the following:

• What Is An Arkansas Real Estate Contract?
• The 5 Essential Parts Of Arkansas Real Estate Contracts
• Types Of Arkansas Real Estate Contracts
• Download Arkansas Real Estate Contract PDFs
• What Disclosures Are Required In An Arkansas Real Estate Contract?
• Arkansas Real Estate Contracts: FAQs
• Final Thoughts On Arkansas Real Estate Contracts

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What Is An Arkansas Real Estate Contract?

An Arkansas real estate contract is a legally binding, hand or digitally-written agreement between two or more parties involved in purchasing, exchanging, or transferring real estate. It dictates the expectations of the main parties, usually the buyer and seller, and specifies conditions under which the contract can be executed or terminated. Arkansas real estate contracts can be likened to legally binding promises between the parties involved.

While various real estate contracts exist in The Natural State, the purchase and sale agreement (PSA) is the most common. It's so prevalent that you'll find that most people will be referring to the PSA whenever discussing real estate contracts. This commonality necessitates understanding the PSA contract, especially if you intend to invest in Arkansas's real estate.

A real estate purchase agreement, or a sale and purchase agreement, is a legal contract between property buyers and sellers in Arkansas. In this agreement, the seller commits to transferring their property to the buyer, who, in return, agrees to pay a certain amount. However, this is just the basic premise. The contract also covers a range of other factors, typically covered in the following sections:

• Party Identification: Every Arkansas real estate purchase contract begins by identifying the primary parties involved, the buyer and seller. These parties are formally referred to as 'The Principles' to distinguish them from other individuals who may be involved, such as real estate agents or brokers. The full names of the buyer and seller and those of any intermediaries must be stated at the start of the agreement; this serves as evidence of their participation in the contract being formed.
• Description Of Property: An Arkansas purchase contract must also describe the real estate asset. For instance, Arkansas's purchase and sale contract must, at the very least, detail the property address and physical details like square footage.
• Purchase Price (including financing contingency): A legally binding Arkansas real estate contract must include the agreed-upon purchase price and any related financing contingencies.
• Payment Terms: A contract of sale real estate must also outline the payment terms. For instance, it must dictate whether the buyer will pay in installments or as a lump sum, plus the earnest money deposit.
• Closing Date: Arkansas real estate contracts must also specify the closing date, extension terms, and procedures.
• Conditions Of Sale: Individuals in a real estate transaction must also outline the terms they expect of each other. These terms are known as conditions of sale or contingencies. Buyer contingencies usually include title searches and inspections, while an example of a seller contingency is financing pre-approval.
• Title & Title Insurance: In Arkansas, sellers transferring their property ownership must indicate whether they have a marketable title in a purchase and sale agreement. If not, they must figure out how and when to resolve the issue. Additionally, they must outline their stance on title insurance.
• Prorations & Adjustments: Arkansas real estate contracts usually include prorations and adjustments to account for expenses like closing costs and income. Prorations divide expenses between the buyer and seller based on their respective periods of property ownership. Adjustments account for the financial changes made to the agreed-upon price due to items not settled before closing.
• Representations & Warranties: A seller in Arkansas must provide representations (assurances) and warranties (promises) regarding the transferred property's condition, status, and characteristics. An example of a representation is a seller assuring the buyer the property complies with all zoning laws. At the same time, a warranty promises a clear property title in Arkansas.
• Disclosures: Sellers in most states are legally mandated to inform buyers of problems regarding the property. These are known as disclosures, and while they're necessary in most states' real estate contracts, they're not mandatory in Arkansas.
• Signatures: Participants must include their signatures to legally bind all the terms and conditions of a purchase and sale agreement.

5 Essential Parts Of Arkansas Real Estate Contracts

All parts of a contract of sale real estate must generally have the following:

• Mutual Assent: Also known as "meeting of the minds," mutual assent is essential to the validity of any Arkansas real estate agreement. It means that all parties involved have a clear and shared understanding of the contract's terms and have voluntarily agreed to them. This element is evidenced by the parties' signatures at the end of the contract. For instance, by signing a purchase and sale agreement, the buyer and the seller indicate they've read, understood, and agreed to the contract terms.
• A Valid Offer & Acceptance: An Arkansas real estate contract must feature a valid offer, that is, a clear proposal from one party and an unconditional acceptance from the other party. If the recipient accepts the offer but proposes different terms, it's not considered valid acceptance. Instead, it constitutes a counter-offer. For example, if a buyer suggests a specific price in their offer, but the seller proposes a different one, that's considered a counteroffer. Both parties must be on the same page for the offer and acceptance to be valid.
• Adequate Consideration: A real estate contract must also feature some sort of value exchange between the parties involved, known as adequate consideration. In a purchase and sale agreement, a seller's adequate consideration is the money they receive for relinquishing their property ownership rights to the buyer.
• Legal Contract Purpose: All the terms and conditions featured within an Arkansas real estate contract must serve a legal purpose. So, even if the contract proves mutual assent, valid offer and acceptance, and adequate consideration, it will not be valid if it involves the sale of someone else's property without their authorization.
• Legal Capacity: Finally, a real estate purchase contract in Arkansas must prove legal capacity. That means the parties involved must be mentally capable and at least 18. If they're not of this legal age, they must prove emancipation for the contract to be legally binding.

Types Of Arkansas Real Estate Contracts

Besides the purchase and sale agreement in Arkansas, here are four other prevalent real estate contracts investors will encounter:

• Real Estate Assignment Contract: Is wholesaling real estate legal in Arkansas? Thanks to this type of contract, it is. Also known as an assignment of contract, real estate investors often use this type of contract to transfer their rights and obligations under an existing contract to another party. They differ from regular real estate agreements in that while the former transfer REI assets, assignment contracts transfer equitable rights. This category of contracts is commonly used in wholesale real estate. It features elements like an assignor (the wholesaler), the assignee (the end buyer), the assignment fee, and the required earnest money amount.
• Lease Agreement: A lease contract usually occurs between landlords and tenants. It dictates the lease terms and both parties' rights and responsibilities. If you plan to invest in rental properties in Arkansas, it's the most common contract you'll encounter.
• Joint Venture Agreement: A JV agreement, as the name suggests, is a contract between parties in a collaborative real estate venture. For example, house flippers collaborating on a house-flipping project will often sign a JV. It outlines the terms of the collaboration, such as cost and profit sharing.
• Listing Agreement: This contract comes into play when a homeowner enlists a real estate agent to sell their property. It could also be between a real estate investor, a landlord, a house flipper, and a real estate agent. Simply put, a listing agreement often happens between parties looking to sell a property and a real estate agent.

Read Also: How To JV Wholesale Deals: Start Closing Deals With Our 6-Step Process

*For in-depth training on Arkansas real estate contracts, Real Estate Skills offers extensive courses to get you ready to make your first investment! Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

Download Arkansas Real Estate Contract PDFs

Real estate agreements legally bind the terms of REI transactions, protecting your interests as an investor and providing a legal basis for conflict resolution. Therefore, it's crucial to understand these agreements, their sections, essential elements, and their applications. Our guide covers these areas comprehensively. However, we've also curated specialized learning programs exploring vital real estate resources extensively. To get you started, here are two free downloadable real estate contracts to use in your Arknsas real estate endeavors:

• Purchase and Sale Agreement
• Wholesale Real Estate Assignment Contract

What Disclosures Are Required In An Arkansas Real Estate Contract?

Arkansas still follows the caveat emptor laws. Also known as "Buyer Beware," these laws free property sellers from having to disclose information about the physical condition of the property. Instead, the responsibility to find out the property's true condition falls on the buyer. However, note that there are some situations where a property seller in Arkansas would be required to provide disclosures. These include:

• Buyer Inquiries
• When A Seller Enlist A Real Estate Agent
• Lead Exposure Disclosure
• Health & Safety Risks
• Fiduciary Relationship

Buyer Inquiries

While sellers aren't obligated to make any disclosures, they're expected to answer honestly when a buyer inquires about the property's condition. If a buyer asks whether the property is in good condition, the seller should reveal all possible defects. Otherwise, they'll be liable if the buyer discovers property defects post-purchase.

When A Seller Enlist A Real Estate Agent

While property sellers in Arkansas aren't required to make disclosures, their agents are expected by The Arkansas Real Estate Commission (AREC) to inform buyers about the facts that may impact the property's value or desirability. So, if you know how to flip houses in Arkansas and hire Realtors for your project, they must issue a disclosure statement.

Lead Exposure Disclosure

For homes built before 1978, Arkansas law mandates that sellers, with or without an agent, provide a lead-based paint disclosure form. If the house was indeed exposed to lead, the seller must include a legal description of the location and current condition of the lead-based paint in the disclosure form. They must also include details of any projects that may have disturbed the paint, plus issue an EPA handbook on lead-based paint hazard management.

Health & Safety Risks

Property sellers in Arkansas are expected to willingly disclose information about property issues that could pose health risks or safety hazards to the buyer. For instance, if there's a weak spot in the property's flooring, they must let the buyer know, even though this might make them change their mind. Other common health and safety risks that sellers must disclose include asbestos or black mold exposure.

Fiduciary Relationship

Sellers with a fiduciary relationship with buyers are legally required to provide property disclosures. In a fiduciary relationship, one party must act in the best interests of the other.

Although Arkansas follows the caveat emptor laws, the above exceptions create gray areas that buyers could use against sellers. Therefore, we recommend that investors in Arkansas complete a property disclosure statement for every property sale.

Read Also: Arkansas Real Estate Classes

Arkansas Real Estate Contracts: FAQs

Arkansas real estate contracts cover a wide range of legal concepts. Consequently, they evoke concerns and questions. Knowing these questions will enable you to address them effectively as a real estate investor, portraying you as a pro and helping you build better rapport with buyers or sellers. That said, check out the frequently asked questions regarding Arkansas real estate contracts, along with their answers:

How Much Detail Must You Provide In Your Disclosures?

Arkansas operates under caveat emptor laws, meaning home sellers must only disclose issues that may harm the buyer, such as lead-based paint, asbestos, black mold, or structural problems. Sellers in Arkansas are also required to provide disclosures if the buyer asks. Simply put, while disclosures aren't mandatory, we recommend disclosing as much as possible, as the exceptions to caveat emptor laws create ambiguities that may be used against you.

What Is The Arkansas Residential Purchase Agreement?

The Arkansas residential purchase agreement is a legally binding contract for residential property sales like single-family homes and townhouses. It outlines the rights and responsibilities of the buyer and seller and, where applicable, their representatives, such as agents and brokers.

Read Also: How To Buy Foreclosed Homes In Arkansas

Can A Seller Back Out Of A Contract In Arkansas?

Yes. Sellers in the state of Arkansas can legally withdraw from a contract if the buyer doesn't meet the contingencies. For instance, if the buyer fails to provide a loan pre-approval letter or bank statements by the agreed-upon date, the seller can withdraw from the contract. Sellers can also withdraw from contracts if there are provisions within the agreement that allow them to do so.

Can A Buyer Back Out Of An Arkansas Real Estate Contract?

A buyer can back out of an Arkansas real estate contract if the seller doesn't meet the conditions of the sale. They can also back out if they cannot meet their contingencies or when a clause within the contract allows them the flexibility to withdraw.

Are Arkansas Real Estate Contracts Assignable?

Yes. Arkansas real estate contracts are usually assignable unless prohibited within the agreement. However, the party looking to assign the contract must use an assignment contract to transfer their rights and obligations to the next party. For example, after obtaining the purchase rights to a property, an Arkansas wholesaler must usually prepare and sign a new assignment real estate contract Arkansas with the end buyer.

Final Thoughts On Arkansas Real Estate Contracts

Real estate contracts are part and parcel of every REI transaction in Arkansas. Whether renting out a short-term rental, leasing a long-term rental, or wholesaling a property, you must draw one to validate the transaction. Beyond validation, contracts protect your interests and those of the parties involved. Given their importance, it's crucial to understand and master these documents to prepare them confidently.

Now that you know the ins and outs of Arkansas real estate contracts, it's time to put that knowledge to use and seize the many opportunities in Arkansas’ real estate market. Enroll in Real Estate Skills' free training program today and take the next step towards becoming a successful real estate investor.

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.