New to real estate investing? Understanding real estate contracts and their various types is
crucial to making informed decisions. A contract is vital to the sale of property, as it binds all
parties to specific conditions. Here are four types of real estate contracts you should know about
as you buy or sell real estate in Park City, Utah.
WHAT IS A REAL ESTATE CONTRACT?
A real estate contract spells out the terms and conditions of a real estate transaction between
the parties involved, such as buyers, sellers, landlords, and tenants. It acts as a written record
of the agreed-upon terms, including the purchase price, property description, financing
arrangements, contingencies, and the rights and responsibilities of the parties involved. A real
estate contract ensures clarity, protects the interests of all parties, and serves as the foundation
for a smooth transaction.
4 TYPES OF REAL ESTATE CONTRACTS
- The purchase agreement
The most common real estate contract is the purchase agreement, also known as a sales
contract. It outlines the agreement between the buyer and seller of a property.
Purchase agreements are classified into three types based on the type of property involved:
– State/association purchase agreement. When a real estate agent is involved in the transaction, this is the standard agreement between the seller and buyer.
– General purchase agreement. This agreement is used when buying a property without a real estate agent and is a shorter version of the state/association purchase agreement.
– Property-specific purchase agreement. This type of purchase agreement is used for properties that aren’t single-family homes. This could be done, for instance, with mobile homes or vacant lots.
- The real estate assignment contract
A real estate assignment contract facilitates property sales between homeowners and end buyers through wholesale strategies. Property owners sign this contract when they agree to sell
their rights to purchase a property to an investor. The investor then has the right to sell their rights to buy the property to a different buyer and receive a small assignment fee. This type of
contract doesn’t grant investors property titles, and the assignment doesn’t appear on the title chain.
- The lease agreement
The lease agreement is a contract between the owner of the property (the landlord) and the tenant who rents it out. A landlord agrees to rent out a property to a tenant in exchange for a
monthly fee. Aside from the rent, the agreement covers security deposits and utilities.
- The power of attorney
When the principal – a person who has granted someone authorization to act on his or her behalf – is physically unable to sign a real estate deal, a power of attorney is often used. The
principal will appoint someone to sign the contract on their behalf as their power of attorney. A principal may face this situation when they are:
– Mentally disabled
– Hospitalized or has any other illness that prevents them from signing the contract
– Not physically present in the country to personally sign the contract
– Owners of several investment properties
– An elderly parent or relative who may not be able to sign the contract
Whether you’re buying, selling, or renting a home, signing a real estate contract is part of the
process. That is why understanding the different types of contracts is critical for a smooth
transaction. A licensed real estate professional like Team Schlopy can help you navigate the
nuances and intricacies of these contracts, ensuring that you understand everything.
Get in touch with Team Schlopy for all of your real estate needs in Park City, Utah.