Real Estate Contracts and Deeds
This chapter explains the contracts and deeds that drive New York real estate transactions, from listing agreements through the purchase contract to the deed that finally transfers title. You will learn the elements that make a contract valid, how offers and counteroffers work, common contingencies, the types of deeds and the covenants they carry, and remedies for breach. New York's attorney-centered custom is central: in most residential sales an attorney for each side reviews and negotiates the contract before it becomes binding, and licensees must never practice law. Practices and standard forms vary by region, so confirm local custom and verify current with NY DOS.
Elements of a Valid Contract
A contract is a legally enforceable agreement between competent parties to do or refrain from doing a lawful act. For any real estate contract to be valid, several essential elements must be present, and the exam tests them constantly. First is mutual assent, the meeting of the minds, created by a valid offer and an unqualified acceptance of that offer's terms. Second is consideration, meaning each party gives something of legal value; in a sale, the buyer promises money and the seller promises the property. Third is legal capacity: the parties must be of legal age and of sound mind. A contract signed by a minor is generally voidable by the minor, and one signed by a person adjudicated incompetent may be void, while intoxication or duress can also impair capacity. Fourth is legality of object, meaning the purpose must be lawful; a contract for an illegal purpose is void from the start. Fifth, though sometimes folded into consideration, is genuine or reality of assent, meaning the agreement must be free of fraud, misrepresentation, mistake, duress, or undue influence, or it may be voidable by the injured party. Real estate carries an additional requirement under the Statute of Frauds, codified in New York's General Obligations Law. Contracts for the sale of real property, and leases for more than one year, must be in writing and signed by the party to be charged (or that party's authorized agent) to be enforceable. An oral agreement to sell land is generally unenforceable no matter how sincere, which is one reason New York transactions move to a written, attorney-reviewed contract quickly. The writing must identify the parties, describe the property, state the price and essential terms, and be signed. Contracts are also classified in ways the exam tests. A bilateral contract exchanges a promise for a promise (the usual purchase contract), while a unilateral contract exchanges a promise for an act (an open listing, where the broker is paid only if they perform). An express contract states its terms in words; an implied contract arises from conduct. Understanding these elements and classifications lets you spot when an agreement is enforceable, and reminds you to route drafting and interpretation to attorneys. Statutory thresholds occasionally change, so verify current with NY DOS.
Offers, Counteroffers, and Contract Status
Negotiation moves through a sequence of offers and counteroffers until the parties reach agreement or walk away. An offer is a definite proposal that, if accepted exactly, forms a contract; it must be communicated, show intent to be bound, and state definite terms. Under the mirror-image rule, an acceptance must match the offer precisely; any change to price, terms, closing date, or included items is not an acceptance but a counteroffer. A counteroffer legally rejects and terminates the original offer and substitutes a new one that the original offeror may now accept, reject, or counter again. An offer can also end by revocation before acceptance, by the offeree's rejection, by the offeror's or offeree's death or incapacity, by expiration of a stated time, or by destruction of the subject property. In New York residential practice, this is complicated by the attorney-review custom. A signed binder or an accepted price is often understood by local practice not to create a binding sale until each party's attorney reviews and both sign the formal contract of sale; until then, either side may typically continue to negotiate or withdraw, and even a competing 'gazump' can occur. Licensees must know their region's custom, present every offer promptly to the client, and never advise a client that they are or are not legally bound, which is a legal question for the attorney. Contracts are classified by how much has been performed and by whether a court will enforce them. An executory contract still has duties to perform; the purchase contract is executory during the gap between signing and closing. An executed contract is one in which both parties have fully performed. On enforceability, a valid contract meets all elements and is fully enforceable; a void contract has no legal effect at all (for example, an illegal purpose); a voidable contract is valid until the party with the power to disaffirm chooses to cancel it (for example, one induced by fraud or signed by a minor); and an unenforceable contract may have been valid but cannot be enforced in court, often because it fails the Statute of Frauds or the limitations period has run. Local customs vary, so verify current with NY DOS.
Deposits, Contingencies, and the New York Contract of Sale
The purchase contract, called the contract of sale in New York, sets out the terms of the deal and commonly includes an earnest money deposit and one or more contingencies. Earnest money (the down payment or contract deposit) demonstrates the buyer's good faith and is customarily held in the escrow account of the seller's attorney or the broker until closing, at which point it is credited toward the purchase price. In New York the contract deposit is often a substantial percentage of the price, and the contract states who holds it and how disputes are resolved. Contingencies are conditions that must be satisfied before a party is obligated to close; if a contingency fails, the protected party may cancel and typically recover the deposit. The most common is the mortgage or financing contingency, which lets the buyer cancel and recover the deposit if they cannot obtain a loan commitment on stated terms by a stated date; New York contracts specify the loan amount, rate ceiling, and commitment deadline precisely. An inspection contingency lets the buyer cancel or renegotiate based on the results of professional inspections, and in co-op and condo deals a board-approval contingency protects the buyer if the board rejects the purchase. Sale-of-current-home, appraisal, and title contingencies also appear. Two clauses deserve special attention. 'Time is of the essence' makes every stated deadline strictly binding, so that missing a date is a material breach; when the contract is not time-of-the-essence, the law implies a reasonable adjournment and a party must serve a proper notice to make time of the essence. A liquidated damages clause fixes in advance the amount recoverable on default, and in most New York residential contracts the seller's sole remedy for a buyer's default is to retain the deposit as liquidated damages. Because New York transactions typically run through attorneys, the licensee's job is to complete the standard fill-in provisions, obtain signatures, deliver the contract to the attorneys, track contingency and closing dates, and never draft custom legal clauses. Standard forms and customs vary by county, so verify current with NY DOS.
Listing Agreements
A listing agreement is an employment contract between a seller and a broker (not an individual salesperson) that authorizes the broker to market the property and defines when and how the broker earns a commission. Because it is a contract for services relating to real property, it should be in writing, and it must state a definite expiration date; New York prohibits listings that automatically renew indefinitely and requires clear termination terms. The listing sets the price, the commission rate or amount, the term, the broker's authority, and the terms of cooperation with other brokers, often through a multiple listing service (MLS). A commission is generally earned when the broker produces a buyer who is ready, willing, and able to purchase on the seller's terms, though most contracts tie actual payment to closing. There are four listing types the exam expects you to distinguish. In an exclusive right to sell, the most common and most protective for the broker, the listed broker earns the commission no matter who procures the buyer, including the seller personally, during the listing term. In an exclusive agency, one broker is appointed, but the owner reserves the right to sell the property themselves without owing a commission; the broker earns only if the broker or another agent produces the buyer. In an open listing, the seller may engage multiple brokers simultaneously and owes a commission only to the one broker who actually procures the buyer, and owes nothing if the seller sells it themselves; an open listing is a unilateral contract. A net listing, in which the broker keeps everything above a net price the seller sets, is discouraged and heavily restricted or effectively prohibited in New York because it creates a direct conflict between the broker's compensation and the duty to get the seller the best price. Related concepts include the procuring cause doctrine (which broker's efforts actually produced the ready, willing, and able buyer), and protection or safety clauses that entitle the broker to a commission if a buyer who was shown the property during the term buys shortly after expiration. Fair housing law fully applies to how a property is listed and advertised. Commission rates are always negotiable and never fixed by law or board, so never imply otherwise, and verify current rules with NY DOS.
Deeds, Title Transfer, and Remedies for Breach
Title to real property is transferred by a deed, a written instrument by which a grantor conveys an interest to a grantee. For a valid conveyance in New York, the deed must be in writing, name a competent grantor and an identifiable grantee, recite consideration, contain words of conveyance (the granting clause), include an adequate legal description, and be signed by the grantor and delivered to and accepted by the grantee. Delivery and acceptance during the grantor's lifetime are essential; a deed found after death that was never delivered conveys nothing. Acknowledgment before a notary is required to record the deed, and recording in the county clerk's office gives constructive notice and protects priority, though it is not required to make the deed valid between the parties. Deeds differ mainly in the covenants of title the grantor promises. A full covenant and warranty deed offers the greatest protection, with the grantor warranting good title against all claims. New York most commonly uses a bargain and sale deed with covenant against grantor's acts for ordinary residential sales, in which the grantor promises only that they personally have done nothing to impair title; a plain bargain and sale deed without that covenant makes no warranties. A quitclaim deed conveys only whatever interest the grantor may have, with no warranties at all, and is used to clear clouds on title, transfer between family members, or resolve boundary questions. A referee's or executor's deed conveys title in a court-supervised context such as a judicial foreclosure or estate sale. New York transfers are subject to the state real estate transfer tax, customarily paid by the seller, and to an additional 'mansion tax' on higher-value residential sales (customarily paid by the buyer); these tax rates and thresholds change, so verify current with NY DOS and the New York State Department of Taxation and Finance. When a party fails to perform, the law provides remedies. Novation substitutes a new contract or party and releases the original obligation with all parties' consent. Assignment transfers contract rights, though the assignor may remain secondarily liable. Liquidated damages let the seller retain the deposit. Because each parcel of land is legally unique, a court may grant specific performance, ordering the reluctant party to actually complete the sale. Rescission unwinds the contract and restores the parties to their pre-contract positions, often refunding the deposit. Money damages compensate for actual losses. Route all such disputes to counsel and verify current with NY DOS.
Last updated: September 2026
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