What Are the Four Types of Real Estate Contracts?
It’s rare to have just one of something, as there are almost always multiple types and designations, especially in law. This is a good thing, as it allows everyone to better understand what’s going on and create real estate contracts that do specific things, instead of everything all at once. Sometimes you need multiple assurances from a real estate contract, so it’s easier to sign a few contracts than just one or half a dozen.
In real estate, there are four types of contracts to consider when you’re in the midst of a transaction. The real estate attorneys at Mazzoni Valvano Szewczyk & Karam can write and review any type for you.
What Are Real Estate Contracts?
Contracts are legally binding documents, and in real estate, they outline terms and conditions for a transaction for a piece of real estate or a transaction affecting a piece of real estate. Terms don’t go into effect until the signing, but they can require certain things to be completed before the contract is signed.
If you are on any side of a real estate transaction, you want to have a contract reviewed before signing. You want to make sure you’re getting or giving everything promised. If you don’t receive what you were promised, you can seek litigation, or if you don’t do something you promised, you can become the defendant in a lawsuit.
Since there are two kinds of real estate already –residential and commercial– there need to be different types of contracts to help regulate transactions.
Types of Real Estate Contracts
The four types of real estate contracts include purchase agreements, assignment contracts, lease agreements, and power of attorney agreements. They can have some crossover with when they’re used and what they need to contain, but they have separate and distinct uses.
These are sales contracts and the most common type of real estate contract. This type of contract establishes everything you need for a real estate property sale in detail. These need to include information such as:
- Identities of all parties involved
- Description of the property
- Condition of the property
- Price of the property
- All included and excluded appliances and fixtures (Ex: refrigerators, furniture)
- Copy of the deed and listing of the deed types
- How costs are assigned to each party
- Money deposit
- Estimated closing costs
- Terms of possession
- Intended date of closing
- Signatures of all parties involved
Because purchase agreements are so numerous and can be used in various ways in real estate, there are three types of purchase agreements.
- State/Association Purchase Agreement: While states and realtor associations don’t have to have standard agreements for local markets, Pennsylvania does to help residents guide their transactions. The state has separate forms for residential real estate and commercial real estate.
- General Purchase Agreement: If you trust the seller/buyer or the agent working for/with you on the sale, you can use a simplified version of the state/association purchase agreement. It can be useful for saving everyone time during the typically long purchasing process.
- Property-Specific Purchase Agreement: For residential property purchases, if you’ve purchased a non-single-family property, you may need to use a different agreement. Different types of properties come with different mandated inspections and rights that a purchase agreement needs to reflect. Our real estate attorneys can review the agreement to make sure you’re not hurt by it later.
These types of contracts are meant for distressed properties, which are properties on the brink of foreclosure or already owned by the bank. When you purchase one of these homes, you’re likely buying it at a discount, intending to sell it to a second buyer already.
It’s similar to a standard purchase agreement from the state or an association, with the difference being that you’re already planning to sell it to another buyer. This streamlines the process and shifts responsibility for the property from you to the second buyer much faster.
Not every real estate transaction has to include a purchase. When someone seeks to rent/lease out their property to someone else, or a tenant, they can. This requires an entirely different kind of contract with rules, stipulations, and responsibilities for both the landowner/landlord and the lessor/tenant. This agreement should also include:
- How utilities are handled
- Cost of security deposit
- Rules surrounding guests and pets
- Rent amount
- Rent due date
- How repairs are handled
These help landlords and tenants avoid issues between each other when something happens.
Power of Attorney
This is only a type of real estate contract if you own real estate and you’re passing control of properties to someone else should you become incapacitated or somehow unable to make decisions. When this happens, your power of attorney will make decisions for your property. Instances where a power of attorney is needed include when the property owner:
- Is hospitalized
- Is not physically present in the area and cannot become so
- Owns several different investment properties that they cannot manage alone
- Is mentally disabled, temporarily or permanently
- Is elderly or otherwise physically disabled from signing a contract themselves
Contact MVSK Law for Attorneys Who Can Review Your Real Estate Contracts
When you’re making a purchase, a sale, or simply establishing control over your properties, you need to have a real estate contract you can trust. Real estate is not something you trade through a verbal agreement. If you want to be safe in trusting in your contract, have a real estate contract review.
The real estate attorneys at MVSK Law have experience with residential and commercial real estate contracts. We can help you make sure you’re receiving and paying for everything you should be when you’re trying to buy or sell real estate. Contact us today.