Real Estate Contract Basics
A real estate contract is a written agreement between two parties to purchase real estate. The purpose of a real estate contract is to explicitly express the agreements involved in the purchase and sale, exchange, or other conveyance of real estate between a buyer and a seller.
Real estate contracts are typically bilateral contracts. A bilateral contract is a reciprocal agreement between two parties in which each party promises to perform an act in exchange for the other party’s promised performance. In terms of the sale of investment real estate, this involves the seller’s promise to relinquish ownership rights of the property to the buyer in exchange for monetary compensation.
Real estate contracts may vary from state to state but they are all very similar. In order for a real estate contract to be enforceable, it must include certain essential elements that are specified by contract law. If you are interested in purchasing investment properties or already own an investment property, we recommend contacting an experienced property management company in Tampa, such as Wise Property Management to discuss your property management options.
REQUIREMENTS OF A REAL ESTATE CONTRACT
There are seven basic requirements, which are mandated by law, that must be present to make a real estate contract valid. When all of these requirements are satisfied, the contract is considered valid and legally enforceable. Below are the seven basic requirements of a real estate contract:
1. The contract must be in writing and there must be an offer and an acceptance of said offer. In order for a real estate contract to be enforceable by law, it is required to be in writing.
2. The contract must have mutual assent and legal purpose. The contract must reflect a mutual assent, or sometimes referred to as “meeting of the minds.” This is when all parties to the contract understand and accept all the essential details, obligations, and rights of the contract. Additionally, the purpose of the contract must fall within legal limitations. A contract that involves any illegal activities is considered void and rendered unenforceable.
3. The contract must identify all of the parties involved. The contract must also identify the full names of all parties involved in the purchase of the investment property. In addition, all parties of the contract must be legally competent when the contract is entered to be enforceable.
4. The contract must identify the subject property. The contract must clearly identify the subject property by including at least the property’s physical address within the contract. Although it is not required, the legal description of the subject property is preferred.
5. The contract must identify the purchase price of the subject property. The amount of the agreed upon sales price or other reasonably ascertainable figure such as an appraisal that is to be completed at a later date must be included in the contract for it to be enforceable.
6. The contract must include consideration. Consideration is anything of legal value that is offered in exchange by one party for something of value from another party. Common forms of consideration include money, property in exchange, or a promise to perform. Without consideration, a contract is not legally enforceable.
7. The contract must be signed by all involved parties. A contract must be signed by both parties involved in the purchase and sale of a property to be legally enforceable. All parties signing must be of legal age and must enter into the contract voluntarily, not by force, to be enforceable.
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