Living in Tennessee is a good decision for lots of reasons. There are several great places to call home in the Volunteer State. Whether you choose to live in some of the more populated areas around Nashville, Memphis, Knoxville, Chattanooga, and other thriving Tennessee municipalities, or if you prefer the country life in small towns intermingled between those metropolises.
If your plans for living in Tennessee involve owning a home or other piece of real estate there, you’ll want to be familiar with the contracts and forms that are used to sell and purchase real estate. I’ll review what those forms are and explain the context behind how the forms work.
To purchase land or a home in Tennessee, you’ll typically use the following forms and contracts:
- Offer to Purchase Real Estate
- Contract for the Sale and Purchase of Real Estate
- Seller’s Disclosure
- Lead-based Paint Disclosure
- Protect Your Family From Lead in Your Home
If you are planning to use a real estate agent to buy or sell your property in Tennessee, you can expect that your agent will be familiar with these forms and contracts as well as any others that might factor into your particular situation. However, it is useful for anyone who is preparing to make important decisions regarding real estate transactions to fully understand the process, including the contracts and forms involved.
You can also buy or sell real estate in Tennessee by using an attorney or by executing the required documents yourself. If you are representing yourself in a real estate deal, such as with a For Sale By Owner (FSBO) sale or when you purchase a home without attorney or agent representation, you need to be extra familiar with how these forms work.
In this article, I will review the forms and contract listed above, which in the majority of cases are sufficient for transacting (either buying or selling) property in Tennessee. I will also point out areas where key decisions need to be considered with those documents. This explanation focuses on residential homes rather than commercial properties, which normally use different documents.
How A Typical Tennessee Real Estate Transaction Works
In the majority of real estate transactions in Tennessee, a person who wants to sell a home hires a real estate agent. The agreement between the selling party and the real estate agent is called an Exclusive Right to Sell Listing Agreement. This agreement identifies the property to be sold and a listing price for the property. It also gives the listing brokerage and agent the right to find a ready, willing, and able buyer for the property in exchange for compensation, normally in the form of a commission of typically 6%, although it can be higher or lower than that.
Once a property is listed with a licensed Tennessee real estate agent and brokerage, it is then advertised for sale on the multiple listing service (MLS) and/or on the brokerage’s website as well as through other marketing and advertising channels. For more information about using a real estate agent in Tennessee, including how to find one to list your home, visit the Tennessee Realtors website.
In listings that are done as FSBO, the home is not advertised to the realtor network through the MLS. Instead, FSBO properties owners can use the local news ads, Zillow.com, FSBO national ads, and other means to advertise their homes for sale.
When a potential buyer of a piece of real estate is ready to purchase a home, an offer to purchase the property is made to the seller. The seller can reject the offer, counter it, or accept it. Once the seller has accepted an offer, a contract is made between the seller and the buyer that allows them to move forward towards transferring ownership of the property in exchange for compensation, typically payment in dollars (usually sourced from a loan) for the purchase price.
Once the purchase contract is in place, the buyer and seller spend a period of time (usually a period of about 30 days) working through the responsibilities outlined in the contract. The seller is obligated to provide to the buyer in-depth information about the property using standard disclosure forms. The seller also typically purchases a title insurance policy warranting that the buyer will have clear title and ownership of the property.
The buyer is obligated to do due diligence on the property using information provided in the seller’s disclosures. During the period between the contract initiation and closing, the buyer also secures funding, normally via a mortgage.
Now that we’ve summarized the process of a home being sold/bought in Tennessee, let’s take a look at the documents involved in Tennessee real estate transactions.
In many cases, these forms and documents are combined together for convenience instead of being executed separately. To see a sample of these documents and other forms and contracts commonly used with Tennessee real estate, you can review the 28-page PDF on the Tennessee Realtors website.
Offer to Purchase Real Estate
The Offer to Purchase Real Estate form is an official offer submitted by a potential buyer to a seller. This offer is usually prepared with the help of a buyer’s real estate agent, but the offer can also be filled out by an individual purchaser without agent representation. In a case where a property is being sold by owner, it is not necessary to have an agent involved on either the seller or the buyer side of the transaction. In FSBO situations, however, it’s wise to seek advice from an attorney or other real estate professional to ensure that the process is done correctly and costly mistakes are avoided.
When a buyer makes a formal, written offer to a seller, the purchase process is officially underway.
In the Offer to Purchase Real Estate, the following details are included among others:
- Identification of the property
- Purchase price
- Method of payment
- Closing expenses and whose responsibilities they will be
- Earnest money; this is intended to show the seller that the buyer is serious about the offer and induces seller engagement
- Expected disclosures to be provided about the property
- Timelines for buyer and seller relative to inspections, disclosures, and other activities required before closing
Contract for the Sale and Purchase of Real Estate
Once the Offer to Purchase Real Estate has been accepted, a Contact for the Sale and Purchase of Real Estate is executed. Often this contract is combined with the Offer to Purchase Real Estate, making them the same document. This is especially true when a real estate agent is involved.
The Contract for the Sale and Purchase of Real Estate contract formalizes the relationship between the buyer and the seller of the property and reinforces the obligations laid out in the Offer to Purchase Real Estate.
Seller’s Disclosure Form
Seller’s disclosures are required as a way for the buyer to become more educated and informed about the state of the property being sold prior to closing it. Because there are many factors that affect the condition and value of the home, including everything from HOA (homeowner association) fees and restrictions that affect the property to the condition of major components of the home, things like the roof, the HVAC, etc.
The Seller’s Disclosure form is a thorough review of the most common material components of a home’s value. There are situations when additional disclosures should be made, such as when the home has been used for activities additional to just being a residence.
Lead-based Paint Disclosure
The lead-based paint disclosure is required by federal law for homes constructed prior to 1978. This disclosure provides an opportunity for sellers to divulge what they know about whether lead-based paint was used in the home, allowing the buyer to make an informed decision and assess risk with regards to potential health problems caused by lead-based paint.
There is a pamphlet available from the EPA that is required to be acknowledged by both seller and buyer. The pamphlet is called: Protect Your Family From Lead in Your Home, and it’s available from the EPA website.
Doing Real Estate Transactions in Tennessee the Right Way
Hopefully this article has help you learn more about the fundamentals of how real estate is sold and purchased in Tennessee, and you’re more prepared for selling your home or buying a new home in Tennessee.