Vermont Real Estate Contracts Guide for the Exam

# Vermont Real Estate Contracts Guide for the Exam

Real estate contracts are heavily tested on the national section of the Vermont PSI exam. Vermont also tests state-specific disclosure requirements that interact directly with purchase agreements.

Elements of a Valid Contract

All enforceable real estate contracts in Vermont require:

1. Mutual assent: A clear offer and an unequivocal acceptance. Counteroffers terminate the original offer.
2. Consideration: The purchase price from the buyer and the promise to convey title from the seller.
3. Capacity: Both parties must be at least 18 years old and mentally competent.
4. Legal purpose: The contract's subject matter must be lawful.
5. In writing: Vermont's Statute of Frauds requires real estate contracts to be in writing and signed by the party against whom enforcement is sought.

Types of Real Estate Contracts

Purchase and Sale Agreement: The primary residential transaction document. Establishes price, closing date, earnest money amount, contingencies, and what personal property is included or excluded.

Listing Agreement: Creates the broker-seller relationship. Vermont listings must include a definite expiration date. The most common form is the exclusive right-to-sell listing.

Option Contract: A unilateral contract giving the buyer the exclusive right to purchase within a set period at a fixed price. The seller cannot accept other offers during the option period.

Lease with Option to Purchase: Combines rental terms with an option to buy. Common in Vermont's rural real estate market where buyers sometimes need time to secure rural financing.

Vermont's Property Condition Disclosure and Contracts

Vermont requires sellers to disclose known material property defects to buyers before or at the time a contract is executed. Key points: - The disclosure applies to all property types, not just residential - Failure to disclose known defects can give buyers the right to void the contract - Licensees independently must disclose material defects they observe — seller silence does not protect the agent

When representing a seller, always ensure the disclosure form is complete before accepting offers. When representing a buyer, review the disclosure carefully and advise your client on the right to conduct inspections.

Act 250 and Contracts

When a property subject to Act 250 is sold, the purchase agreement should address the transfer of any existing Act 250 permit and compliance status. Licensees must identify Act 250 status early in the listing process and disclose it in the purchase agreement. Buyers should have the opportunity to review Act 250 permit conditions before closing.

Contract Status Terms

• Executory: Performance is still owed — any contract before closing
• Executed: All obligations fulfilled — after a completed closing
• Void: Lacks a required element or has an illegal purpose — never valid
• Voidable: Valid but rescindable by one party — contract induced by misrepresentation, contract signed by a minor

Breach of Contract Remedies

If a buyer defaults, the seller may retain earnest money as liquidated damages (if so specified) or pursue specific performance.

If a seller defaults, the buyer may seek specific performance or monetary damages. Because real property is unique, Vermont courts will grant specific performance in appropriate cases.

Earnest Money Handling

Earnest money must be deposited promptly in the brokerage's trust account. Commingling earnest money with operating funds is a license law violation under 26 V.S.A. Chapter 41 and a common grounds for VREC disciplinary action.