Key Takeaways
- DC follows the Statute of Frauds requiring real estate contracts to be in writing and signed
- Valid contracts require offer, acceptance, consideration, legal capacity, and lawful purpose
- Earnest money must be deposited within 7 days into an escrow account at a DC-insured financial institution
- Standard contract forms are available through the Greater Capital Area Association of Realtors
- Time is of the essence clauses are commonly used and strictly enforced
DC Contract Requirements
DC real estate contracts must meet specific legal requirements to be valid and enforceable.
Statute of Frauds
Under the Statute of Frauds, contracts for the sale of real property must be:
- In writing
- Signed by the party to be charged (or their authorized agent)
Key Point: Oral agreements to sell real estate are generally unenforceable in DC.
Essential Elements of a Valid Contract
| Element | Description |
|---|---|
| Offer | Clear proposal with definite terms |
| Acceptance | Unequivocal agreement to the offer's terms |
| Consideration | Something of value exchanged (usually money) |
| Legal capacity | Parties must be competent to contract |
| Lawful purpose | Contract cannot be for illegal purposes |
| In writing | Required for real estate contracts |
Common Contract Forms
DC real estate professionals typically use:
| Form | Use |
|---|---|
| Regional Sales Contract | Standard purchase agreement (GCAAR) |
| Commercial Contract | Business property transactions |
| Lease Agreement | Rental property |
| Listing Agreement | Seller representation |
| Buyer Agency Agreement | Buyer representation |
Note: The Greater Capital Area Association of REALTORS (GCAAR) provides standardized forms used by many DC licensees.
Earnest Money Deposits
Earnest money (also called a good faith deposit) demonstrates the buyer's serious intent.
DC Deposit Requirements
| Requirement | Details |
|---|---|
| Deposit deadline | Within 7 days (absent contrary written instructions) |
| Where deposited | Escrow account at DC-insured financial institution |
| Account type | FDIC or FSLIC insured (or successor) |
| Who holds | Broker/escrow holder maintains separate account |
Common Contract Contingencies
Contingencies allow parties to exit the contract if certain conditions aren't met:
Financing Contingency
| Element | Details |
|---|---|
| Purpose | Buyer can cancel if financing not obtained |
| Timeline | Specified number of days to secure commitment |
| Documentation | May require denial letter from lender |
Inspection Contingency
| Element | Details |
|---|---|
| Purpose | Buyer can inspect property and negotiate repairs |
| Timeline | Inspection period specified in contract |
| Options | Accept, negotiate repairs, or cancel |
Appraisal Contingency
| Element | Details |
|---|---|
| Purpose | Protects buyer if property appraises below price |
| Options | Seller reduce price, buyer pay difference, or cancel |
Home Sale Contingency
| Element | Details |
|---|---|
| Purpose | Buyer must sell current home first |
| Timeline | Specified period to sell |
| Kick-out clause | Seller may accept backup offers |
Termination of Contracts
Contracts may be terminated by:
| Method | Description |
|---|---|
| Performance | Both parties fulfill obligations |
| Mutual agreement | Both parties agree to cancel |
| Contingency not met | Condition specified in contract fails |
| Breach | One party fails to perform |
| Impossibility | Performance becomes impossible |
Time is of the Essence
Many DC real estate contracts include a "time is of the essence" clause:
- Deadlines are strict and legally binding
- Missing a deadline may constitute breach
- Extensions require written agreement
Exam Tip: Understand the difference between an executory contract (not yet fully performed) and an executed contract (fully performed).
Contract Default and Remedies
Buyer Default
If the buyer defaults, seller may:
| Remedy | Description |
|---|---|
| Keep earnest money | As liquidated damages (if provided in contract) |
| Sue for damages | Actual damages caused by breach |
| Sue for specific performance | Force buyer to complete purchase |
Seller Default
If the seller defaults, buyer may:
| Remedy | Description |
|---|---|
| Return of earnest money | Full refund of deposit |
| Sue for damages | Actual damages caused by breach |
| Sue for specific performance | Force seller to convey property |
Under DC law, within how many days must earnest money be deposited into escrow (absent contrary written instructions)?
Under DC's Statute of Frauds, which statement is TRUE about real estate contracts?