The Know-how’s of a Real Estate Contracts
Real Estate contracts revolve around agreements that are tangible and written form that is known as contracts. The contract legally binds two or more parties for the purchase, exchange, or any other transaction related to real estate. The contract needs will be legally binding only when it is in written form signed by both the required parties under the Statutes of Frauds. A real Estate Contract is like a pact between two people agreeing upon a property in exchange for money or any other agreed terms.
What are the requirements of a Real Estate Contract in the US?
A Real Estate Contract forms the basis of legal enforcement that can be taken if the contract clauses are not followed. This applies to the buyer and the seller or any other party involved in the contract. A contract cannot compel a person or organization to follow it, but rather the consequences of not following the agreement are much more applicable in this case. Many contracts are prepared, but real estate contracts have much more value and cost involved in it. Well-written agreements protect both parties and a basis of proof if either one refrains from following the due diligence as per the agreement. Following some of the standard requirements of a real estate contract, one must know.
One of the parties makes an offer by preparing the contract, mentioning the detail discussed verbally in a more accurate manner in the written contract. The contract is signed, initial, or even stamped by the first party before being signed by the receiving party.
The other party accepts the contract and signs it after thorough proofreading and verifications. It is always advisable to hire a lawyer to understand the deals as real estate involves a considerable amount of money. Any missing detail or twist and turning of facts will result in a significant loss. Both the parties must include their original signature, initials, and even stamp if the contract is legally binding. In case there is a better offer, discount provision, or change in the clause or rules, a new contract must be written and signed. The old deal must be discarded and made void at the same time. If one of the parties doesn’t respond, the contract expires as per the date of validity mentioned on the deal.
Consideration is one of the main conditions in a Real Estate Contract. It is the confirmation about money, service, or even something of value in exchange for the property. It can also be an exchange of a property or service.
All the parties involved in the signing of the contract must be of legal age. They should be mentally stable and fit. They should be forced into signing the contract or manipulated to do so. The agreement also cannot be signed by a minor.
Legality of Purpose
The contract holds a legal capacity unless proven that its contents are illegal or criminal. The contract should not support any unlawful cause to redeem it as void once tried by the law.
Types of Real Estate Contract in the US
There are Four common types of Real Estate Contracts.
The Real Estate Assignment Contract
This type of contract is prevalent and also known as the broker’s contract. The homeowner may not always find the best buyer for the property; hence the owner can enter into a broker contract. A Real Estate assignment contract is a wholesale strategy to facilitate the sale of the property between a property owner and a potential buyer. The agreement states that the property owner agrees to sell the property to an investor, and both parties sign the contract to honor the deal.
The assignment contract is not a sale contract but the right to sell. It gives no title deed rights to the investor, who in turn charge percentage fees from the end buyer to sell the property directly from the owner or on behalf of the owner. The assignment contract is free from any title deed chain in the actual sales contract.
A Purchase contract is also called a sales contract, wherein the entire plan for sale gets mentioned in the agreement. There are three different types of property contracts.
Association Purchase Agreement
This contract is between a seller and a real estate agent. There are no title deed rights transferred to the estate investor but the allowance to advertise the property for sale on behalf of the owner.
General Purchase Agreement
A sales agreement wherein there is no involvement or an assignment contract/broker. The Agreement is free of any broker-related fees and clauses. It is purely between the seller and the buyer.
Special Property Purchase Agreement
The properties such as boathouses, mobile homes, tiny structure homes, or even cave properties are some of the properties that come under the Special Property Purchase Agreement.
Here are some of the terms listed below
- The validity date of the contract
- Parties involved in the signing of the contract
- Terms of services, if any.
- Price or cost of the service
- Payment plans
- List of contingencies
- Details about the property
- Terms of purchase and possession
- Signature and initials of the parties
- Entire layout and plan of the property
A lease Agreement
A Lease agreement is an agreement between the landlord and tenant. The clauses in the agreement are for the short or long term wherein both parties agree by signing the contract. The contract is bound by certain months—quarterly or bi-yearly payment from the tenant to the landlord. In turn, the Landlord maintains the property as per the terms of the contract. All the clauses such as damages, wear, and tear must be mentioned in the contract to avoid any disputes in the future arising from discrepancies within the agreement.
Power of Attorney
A power of attorney is created when the property owner cannot be physically present for any transaction related to the property. The owner provides some rights to a power of attorney by contract apart from owning the property. The POA takes care of investing the property, gaining profits and transferring the same to the owner, and entering into tenancy contracts.
The Real Estate Contract is very common, but each contract involves a considerable amount of money. Hence, a lawyer should view these contracts to filter any discrepancies and find any illegal and fraudulent terms in the agreement. A professional, experienced lawyer addresses grievances regarding fraudulent Real Estate Contracts, or one of the parties is not following the clause mentioned in the contract laws. A real estate contract litigation can cost a fortune if the property at dispute is of high worth. Hence an Attorney’s intervention during the processing of entering into a contract is an inevitable one.