One area of a home sale that is often misunderstood is the term “ratified contract.” Unfortunately, when it comes to real estate law, this term can mean different things to different people. In law, the term “ratified” means the contract is binding on all parties. However, we know that in home sales contingencies such as a home inspection can give the buyer an easy exit from the contact with a full refund of their deposit. There are others who would claim that a contract is ratified once both parties accept the conditions, even though the contingencies have been met. So who is right?
Generally speaking – both, and hence the confusion. It really comes down to the wording of the actual contract. Under a Regional Sales Contract, the contract is not full ratified until both parties sign off on all contingencies. At that point, there is little the buyer or seller can do to void that contract and it should proceed through to settlement. The ratification date is important because it starts that final phase of a sale which is completed at settlement. For a seller, a ratified contract where all contingencies have been signed off on like having a check in the hand – they can use that ratified contract to complete their own future home buying processes.
If the sale has not been completed using a Regional Sales Contract, then the ratification date could be the date that both parties agree on the sales terms. Contingencies will not have been satisfied, but time deadlines will automatically closely satisfy those contingencies if they are not met. For example, if the contract states that the buyer has seven days from the ratification date to complete a home inspection, the buyer cannot use the home inspection report to void the contract if the inspection was undertaken after that seven day period.
Home sales contracts are complex and you should follow the advice of a professional when negotiating them. This could be a lawyer or a buyers real estate agent. They will ensure you meet the contingency time lines and that a sales contract is successfully ratified and the process concluded at a happy settlement.