Real Estate Contracts: Understanding the Basics
Real estate is a lucrative business and an exciting career. Hundreds of people take up positions as real estate agents every year. If entering the real estate game is something your keen to do then check out Udemy’s course on how to start a career in Real Estate.
If you’re already working in the field, you may want to check out Udemy’s exciting new course on Twitter For Real Estate. In it you’ll find great advice on how to take your strategies to the next level using social media.
Either way, fresh or seasoned, there are several key components to the business that any real estate agent must understand to succeed. One such focus is a strong knowledge of contracts and law. A better understanding of real estate contracts, including both how to read and write them, can put you in a better position to serve your clients and your business.
What is a Real Estate Contract?
Real estate is defined as a piece of property that consists of actual land, buildings, or in some cases both. A real estate contract, most simply, is a written document signed by two persons or business representatives (also known as parties) for the purchase and sale, exchange, or other form of passage of that estate. When a real estate contract is drawn up for the cases listed above it results in the transference of a deed or title. These are recordable documents that confirm ownership of the real estate in question. However, deeds, titles, or easements are not the ‘real estate contract’ itself. They are the documents that prove legal right and ownership; a real estate contract is the document that details the way in which those items exchanged from one party to the other.
Not all real estate contracts are created for the purchase, sale, or exchange of real estate. A Leasehold Estate is a type of estate for a piece of property that is being rented. It will have a different set of rules for exchange. This can be for a home, apartment, or piece of land (the real estate in question). These rental contracts are called ‘leases’ and do not result in recorded deeds or titles like the above-mentioned contracts.
Most often, a real estate contract is bilateral. This means that two parties have agreed upon the information for the sale, including exchange of monies, titles, and the like.
Details of a Real Estate Contract
First and foremost, in order for a real estate contract to be held up and valid in a court of law it must be in writing. This is a standard necessity required by the United Stats Government. Any non-written real estate contract – i.e. verbal – is non-binding according to American courts. Next, it is important that the contract include certain key information in order to be considered a respected, safe, and upstanding contract.
The full name of any parties involved in the contract must be clearly stated on the contract itself. Identifying the parties is a must. Without stating the names or titles of the parties involved there will be no proof as to their existence in relation to the real estate contract being created. The parties are usually split into two categories: buyers and sellers. Most often they are referred to as “The Principles.” This will separate them from the real estate agent who is acting only as a representative in the negotiation of price and other amenities. If a real estate agent is the person brokering the sale, then they should be listed also in this manner.
The real estate being sold needs to be identified. Just like the parties above, it is necessary that this information be in writing on the contract so that no miscommunication is possible. At the very minimum the address of the property should be listed. However, it is most often preferable that a legal description be included. A legal description will state the acreage of the property, dimensions of the house, and any other pertinent information available.
Invariably there will be debate between the parties as to the price of the sale. Bargaining, as any agent or salesman knows, is part of the experience. Once a price is agreed upon and hands have been shaken, make sure that this price is put onto the contract and clearly stated, in both number and as a written phrase. If the price is not on the contract it can be considered null and void.
Without signatures from both parties the contract is not valid. Signing the contract proves that both parties agreed to the information within it and will follow the rules set out by the contract. A real estate contract must be entered voluntarily. No one can be forced to sign the document.
Most real estate contracts do not require notarization by a Notary Public however it is not uncommon for buyers or sellers to request this. It is just one more step that allows all parties involved to feel absolutely secure in the contract that has been agreed upon.
A strong real estate contract will often include more information. Many contracts will include a ‘Deed Specified.’ This section focuses on the actual deed to the property. Remember, the real estate contract is the contract of sale, not the document that proves ownership of the property. It is important that in the real estate contract the actual deed be specified. Furthermore if there are any liens or encumbrances on that title – which will transfer over during sale – they must be listed as well. Failure to disclose that information could lead to a nullification of the contract and an end of the sale.
A contingency section is included in the contract to specify the duties that must be performed once the contract is signed. These include mortgage, inspections, and secondary sale contingencies. Each section will pertain to the property in question and should be agreed upon by both parties.
Undoubtedly there will be a lot of back and forth discussions and paperwork. If you are finding yourself drowning in hard copies check out Udemy’s Course on creating paperless files for real estate. It might help you to get digitally organized so you can focus on the tasks at hand. Because real estate contracts are so number heavy it might be wise to also check out Udemy’s Course on Excel for Real Estate as well. These courses might give you the one-two punch needed to do your best.
Learning How to Be a Real Estate Agent (something you can do on Udemy) means knowing everything you can about the field. Real estate contracts can be wordy, confusing, and take time and patience to get right. It is important that both parties be happy with the final product. Therefore, a better understanding of real estate contracts is necessary in order to avoid conflict and move towards closing a great deal faster. If you’ve been thinking about getting into the real estate game for some time then start today by checking out Udemy’s course on how to start a career in real estate. In it you’ll find everything you need to get your feet on the solid ground of real estate. From there, check out other Udemy courses so that when the time comes you’ll be drafting strong contracts for every sale you make!
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