Real Estate Contracts

In Claim Farmland Realty, agency disclosure is required by real estate brokers and salespersons upon first contact with prospective buyers or sellers. When a buyer becomes interested in a listed property, negotiations begin and real estate contracts are created. A real estate contract is a legal document that outlines the terms and conditions of an agreement between a buyer and a seller to buy or sell real estate. There is a mutual agreement between two or more parties, in which each of the parties pledges to do, or is shown to have done, something that will benefit the others. (A contract can also oblige someone not to do a certain thing.). This “something” can take a multitude of forms. A common one is a payment of money, though there are valid contracts that require no money payment. Each of the parties must be shown to benefit, so contracts must involve exchanges of benefits. For example, A gives something to B, in return for which B gives something to A. A common example is a cash purchase: I will give money to a home property owner in exchange for his house that is listed for sale on Claim Farmland Realty. However, a valid contract need not require cash or money: I will trade my house for your farmland, or we both agree that neither of us will build on the top of our farmland an eyesore structure that will be in the line of sight of the other.

The critical test of the validity of a contract is the issue of whether or not all parties receive an exchange of benefits. All parties must mutually agree with the terms and conditions of the contract with written signatures provided from all parties. The amount of benefit can vary; but if benefit to one or both parties is lacking, then usually there is no contract, for it is an ancient precept of law that no one should give something for nothing. The most important test is that both parties receive an exchange of benefits in relation to worth, usage and value.

Requirements of Valid Real Estate Contracts

Only a valid real estate contract can be considered by a court. A valid real estate contract must include the following key requirements: offer and acceptance, consideration (exchange of value), legally competent parties, legality of purpose, description of land, legal form and any necessary contingencies, such as, property inspections and mortgage financing. A mortgage contingency is a clause written into real estate transactions that gives home buyers a set time frame to secure a mortgage loan for a home. All valid contracts must have the following attributes:

• Mutual agreement
• Consideration
• Legally competent parties
• Lawful purpose
• Legal form

Mutual Agreement

A mutual agreement is when all parties agree on a set of terms or conditions of a contract without any form of duress, coercion, or deception. The buyer and seller agree on the contract’s terms, obligations, and rights. The agreement must clearly articulate the terms, accurately describe the property, and specify the agreed-upon price. The seller accepts the buyer’s offer on the property. A clear proposal from the buyer (offer) on the property is accepted by the seller, creating a binding agreement. All parties acknowledge the offer and all parties accept it. Once an offer is accepted, a contract or legal agreement will be prepared and signatures to a written contract will need to be signed by all parties involved. The buyer and seller sign a purchase and sale agreement.  The requirements that all parties to the contract have an understanding of the conditions and stipulations of the agreement indicates a mutual agreement. A mutual agreement is often referred to as offer and acceptance, reality of consent, mutual assent and meeting of the minds.

Consideration

Examples of consideration in a contract:

• A pays $1,000,000.00 to B. B transfers ownership of a house to A.
• A pays B $3,200.00 per month. B gives A the right to use an apartment for each month for which A pays.
• A pays B $50.00. B let’s A use gym facilities in B‘s gym.
• A agrees not to eat food in the bedroom because the bugs might come in an area where B and C sleep. B agrees not to eat food in the bedroom because the bugs might come in an area where A and C sleep. C agrees not to eat food in the bedroom because the bugs might come in an area where A and B sleep.
• A agrees to find a buyer for B‘s house. B agrees to pay A a commission of 50 percent of the sale price if A finds a buyer.