Real estate contracts involve complex agreements between buyers, sellers, agents, brokers, lenders, and landlords that bind the parties to one another legally. Depending on the type of property being bought and sold, there are several types of contracts involved in a transaction. These contracts are essential to ensuring that every person’s rights and responsibilities are documented and agreed upon.
The most common types of real estate contracts include sales contracts, lease-options, leases, and financing contracts.
Sales Contracts
Sales contracts are documents that govern the sale of real estate property. They typically include all the legal terms and conditions that both the buyer and the seller have agreed upon prior to closing. Additionally, some states require that a sales contract is signed off by both parties and disclosed to the lender prior to the closing of the deal. It is important to ensure that all the terms of the agreement are outlined in the contract and that both parties are in agreement. When signing a real estate contract you should always be mindful of the inspection period. The inspection period give you the opportunity to back out of the contract without any disputes.
Lease-Options
A lease-option is an agreement between a property owner and a tenant, whereby the tenant will rent the property but also has an option to purchase the property at a pre-determined price. This type of agreement can be beneficial to both the tenant and the property owner as it allows the tenant to build equity in the property and the property owner to generate some rental income.
There are two types of these contracts, the option to buy or the agreement to buy. The agreement to buy tends to be much more desirable to sellers, in general, given that the home must be purchased at the end of the agreement period by the renter. This strategy allows buyers time to build savings towards a deposit on a conventional loan and find financing. Should your buyers have chosen the option contract, they are not obligated as in the agreement to buy. Should they be unable to qualify for a mortgage loan the renter can simply walk away at the end of the agreement.
Leases
Leases are agreements between landlords and tenants in which the landlord allows the tenant to occupy the property in exchange for the tenant paying rent on a periodic basis. Leases are the most commonly used form of occupying a residence and they typically last from one year to five years, although there are also short-term leases. The terms of the lease will outline the rules and regulations for both the tenant and the landlord, as well as the rights and responsibilities of both parties.
Financing Contracts
Financing contracts are agreements between buyers and lenders that sets out the terms and conditions of the loan. These contracts typically outline the type of loan, the loan amount, the repayment terms, and the interests rate. Additionally, some lenders may also require that the buyer agrees to certain conditions in order to be approved for the loan. Financing contracts can be extremely beneficial to both buyers and lenders as it provides security to both parties.
Real estate contracts are essential when it comes to navigating a transaction successfully. They are legally binding documents that protect the rights of both the buyer and the seller involved in the transaction. It is always important to go through each contract carefully to ensure that the terms and conditions are understood and that both parties are in agreement. Additionally, having an experienced real estate attorney review each contract is advised.
Do not let intimidating contracts stop you from success in your investment business. The professionals at Down South Florida Home Buyers are the best guide you could have to walk you through real estate contracts, we make your Homestead real estate investment business easy. At Down South Florida Home Buyers, we take the time to listen to your dreams and help you make plans, and update plans as your life and goals change over time. When a great deal can be yours, you will know you’re using the contract that best suits your long term investment goals. Why not get started now? Just send us a message or call Down South Florida Home Buyers at (239) 766-6225 today!