![]() Other information such as whether you need to secure an FHA or VA loan must also be included in this section. If you do not follow this suggestion and are only able to secure an interest rate above 5 percent, the property seller will be able to keep the earnest money deposit. First, if you understand that you do not have the income to pay a mortgage that has above a 5 percent interest rate, do not put a rate higher than this on the agreement. This contingency is extremely important for a few reasons. Further, the purchase offer should be contingent upon obtaining financing at a specified interest rate. ![]() However, before creating the purchase offer, the buyer must check the potential interest rate on the loan and where this loan fits into your current debt obligations and credit score. This means that the buyer will have to take out a mortgage. In most cases, the home buyer will not have enough money saved up to make a cash-only offer. Aside from the common terms such as the address and purchase price of the property, below are some of the most important contingencies to include in a real estate contract. When you make a formal offer to buy a home or accept an offer for the property you are selling, you will be required to read and fill out a lot of paperwork that typically includes specific terms and conditions relating to the offer. Seven Must-Have Real Estate Contract Conditions Everyone must want the deal to occur or it will be considered invalid. This means that there cannot be fraud, misrepresentation, a mistake, or undue duress on any entity in the contract. The final legal requirement that a contract must have is for both parties to consent willingly and knowingly to the terms of the contract. In real estate deals, money is the most common consideration. No matter the thing being exchanged, the contract must spell out the consideration. Things that have value include money, services, other valuable goods, and even love and affection. ConsiderationĬonsideration is when one party offers something of legal value to another person in a contract. In short, the buyer offers a price with contingencies and the seller is accepting these contingencies. When dealing with real estate transactions, the best practice is to create a written contract and receive signatures from the parties involved. Though this is not the best way to sell or purchase a property. However, in certain states, a handshake with a witness is enough to establish the offer and acceptance criterion. In real estate contracts, the offer to purchase a property by the buyer and acceptance by the seller illustrates this element. If there is any doubt in your mind that the other party involved in your real estate contract does not have the capacity, it is vital that you do some due diligence to avoid legal issues down the road. Similarly, a person who does not have mental capacity cannot legally sign a contract buying, selling, or leasing a property. You may get this person to sign the contract, but courts will not uphold the agreement. In this case, say you find out that a 17-year-old inherits a piece of real estate that you want. ![]() ![]() Legal competence requires that someone be at least 18 years old and not be mentally incapacitated at the time of signing. Legally Competent PartiesĪnother required element is that both parties signing the contract must be legally competent. For example, if the seller of the property is not the legal owner, not only will a judge not participate in the deal, however, it is also likely that they will end up in jail. Further, a contract that involves fraud by either party will be invalidated. This means that the purpose of the contract must conform to existing laws. In any contract, the parties involved in the deal cannot execute a contract if the transaction is inherently illegal. To establish legality, a real estate contract must include a legal purpose, legally competent parties, agreement by offer and acceptance, consideration, and consent. Required Elements of a Real Estate Contract Below is a description of the elements of a valid and useful real estate contract. However, there are certain elements a real estate contract must have to be legally valid and other conditions the contract should include to be useful for both real property buyers and sellers. Every real estate transaction, whether it is a sale, purchase, or lease of residential or commercial property requires a real estate contract-which can sometimes be the most complex part of the transaction. From hiring a real estate agent, finding the perfect property, getting finance for the home, and finally creating a real estate contract. Real estate can lead to complicated issues because of the many details involved in each deal. ![]()
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