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Real Estate Agreements: A Guide for Beginner Investors

Real Estate Agreements: A Guide for Beginner Investors

If you are new to the real estate industry, you may not be fully aware of real estate agreements. Essentially, these agreements are binding contracts among the involved parties for the sale, purchase, or any other type of real estate transaction.

These agreements play a crucial role in real estate planning. As the property owner, you will be obligated to sign contracts before you close any real estate deal. Therefore, it is important to understand the purpose and the different types of real estate contracts and agreements. Having a foundational knowledge of the same will help you make sound investment decisions

What are Real Estate Agreements?

A real estate agreement is a legal document signed between two or more parties for any real estate transaction that takes place. This agreement specifies all terms that are agreed upon after negotiations.

Real estate contracts are meant to safeguard the interests of all parties involved. They also form the basis of legal action in case any party does not adhere to the terms mentioned within the contract. In the US, these contractual agreements are mandated by the Statute of Frauds (SOF) in complete writing and signed by both parties.

Often, the real estate agreement laws vary from one state to another. Thus, it is advisable to work with a reputed and experienced attorney before authorizing any real estate agreements.  

Different Types of Real Estate Agreements

There are 4 kinds of real estate contract agreements that every new investor must know about. These include the following:

   1. Purchase Agreements

This is the most commonly used type of real estate agreement. It is a binding contract between two parties, i.e. the property seller and buyer, to transfer a specific property. Most real estate agents help with preparing purchase contracts that include every small detail regarding the sale of a property.

Real_estate_agreements

Typically, real estate agreements comprise the following details:

  • Identification of both parties involved
  • A clear description and condition of the property in question
  • Purchase price
  • A list of contingencies
  • Any significant detail, rights of the owner, or obligations
  • Any furniture item, fixture, appliance, etc. included with the property
  • Initial money deposit
  • Possession terms
  • Closing date, and more

   2. Real Estate Assignment Contract

This type of agreement is used by a real estate investor to facilitate the sale of a particular property between an owner and the user buyer. The principal owner of the property signs a contract with the investor that provides the latter with rights to purchase the property. But, it must be noted that the contract only provides the purchase rights to the investor and that no actual purchase of the property takes place.

Once the agreement is signed, the investor retains the sole property rights. These rights permit him to sell the property to another buyer. Thus, with these types of real estate agreements, the property owner is not selling the property but only its rights.

   3. Lease Agreement

As the name suggests, these agreements enable the leasing of real estate properties. The contract is signed between a property owner and a tenant of the property. In other words, the property owner approves to offer his/her property to the tenant to reside in at a pre-defined monthly or quarterly rate.

Real_estate_agreements

Apart from the rental price, these types of real estate agreements also include details like security deposit and payment of utilities. Well-defined lease contracts help to avoid legal disputes later on.

   4. Power of Attorney

A power of attorney is an agreement that enables the principal property owner to transfer the ownership to another party. In other words, the principal owner will appoint another party to serve as the power of attorney so they can sign the real estate contract on their behalf.

Mostly, this happens when the principal owner is mentally incapacitated, extremely unwell that restrains his ability to sign the contract, or is not physically present to authorize the agreement

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