Contracts are essential in big purchases, especially real estate. It will be one of, if not the most expensive purchase you’ll ever make, and the transaction must be legally binding in the form of contracts. When talking about real estate, there are several kinds of contracts including purchase agreements, lease agreements, contracts for deeds, and rent-to-own. Let’s review them to find out why they’re necessary when you decide to lease, purchase, or sell a home.
First, you should note that both the buyer and seller of the home must sign all contracts to
complete the deal. Real estate contracts typically cover the financial terms of the deal, the obligations of both buyer and seller, including rights to home inspection, closing date details, and outline the sale of the home. They’re legally binding and necessary for all real estate transactions.
Purchase Agreements
Let’s start with the most common contract, the purchase agreement. This contract is binding between the buyer and seller of the property and outlines all the details of a home sale transaction. These details can include:
- Buyer and seller info
- Property details
- Pricing and Financing
- Closing dates and costs
- Termination conditions
- Contingencies
- Rights to Inspect
Note that not every purchase agreement will outline the same items. In an average transaction, the buyer will present the purchase agreement to the seller, and there will likely be some back and forth until everything is settled and both parties are satisfied. Once the purchase agreement has been signed, you’re now “under contract.”
Lease Agreements
Lease agreements are used for those of us who opt to rent instead of buy and landlords who are renting out their property. The lease agreement should outline:
- Monthly price of rent
- Length of rental and due date of monthly rent
- Obligations of landlord and tenant
Lease agreements can be a bit confusing for those new to real estate, and we always recommend reviewing the agreement with an attorney to be sure you know what you are agreeing to.
Contracts for Deed
A contract for deed is a bit different than a purchase agreement. It’s a legally binding agreement that allows the buyer of the property to take possession of the home and start making payments to the seller; however, the seller still technically owns the title of the property until all payments are made. This kind of contract is appropriate in situations where the buyer cannot qualify for a mortgage due to poor credit history, etc. You are highly advised to speak to a real estate attorney before signing a contract for deed as these kinds of agreements can be tricky and NC laws require specific language and recordation.
Rent-To-Own
Lastly, let’s review rent-to-own contracts. These contracts allow a person to rent a property for a specified amount of time, with the option of purchasing the property before the lease is up. This is a great option for those unsure if they’ll like the area or the property specifically without making a huge commitment.
Have any more questions about real estate contracts? Contact the Kelly & West team today.
