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    Basics of Real Estate Contract

    By M H | May 12, 2015

    Real Estate ContractContract of real estate is a legal agreement to transfer the property from one person to another. As contract in real estate is such an important factor in real estate market and is very much useful to real estate investor, there must be a clear understanding about the basics of contract.

    Types of contract

    1)      Unilateral contract

    A contract in which only one party makes promise is called unilateral contract. Example: Ron offers to sell its property to Hazel. Ron is able to sell if hazel is ready to purchase. However Hazel is under no compulsion to buy the property.

    2)      Bilateral Contract

    It is such a contract in which both the party makes promise to each other. Example: A purchase agreement is a bilateral contract. Roby gives Ronny 200000 $ in exchange of the title of the real estate property of Ronny.

    3)      Expressed Contract

    In this contract, the parties state their terms either in writing or orally. But in case of real estate contracts, the contract must be in written form. Example Bob express his agreement to for real estate transaction with Sam.

    4)      Implied Contract

    It is a contract which is done with actions of the parties. Relationship or intentions also play an important role. In case of real estate contract, as it is necessary to be in writing implied contracts are rarely formed.

    Status of Contracts

    1)      Executory contract     

    Executory contract means the contract is not yet completed. It is yet to perform. Example: In case of real estate contract, Jacob has transferred the property to Alice but Alice has not made the payment. It is executor contract.

    2)      Executed Contract

    Here both the parties to contract had performed all its duty. It means a completed contract. Example: Jacob transfers the property in favor of Alice and Alice makes the full payment.

    Legal Effects of Contract

    1)      Valid

    A contract which agreed by all parties and legally correct and complying with all the acts of company law is considered to be valid contract.

    2)      Void

    A contract which fails to comply with criteria of company law and it may be illegal and unenforceable in the court of law is void contract. Example If Robert enters into contract with Charlie to give 3000$ if Charlie takes away Jenny’s home by force. It is invalid and the intention is also not lawful.

    3)      Voidable

    Any contract which appears to be valid but it is not so from one party. That party has a right to rescind the contract. This contract is unenforceable. It can be a result of coercion and undue influence.

    4)      Enforceable

    Any contract which fulfill all requirements of contract law and offers you legal remedies to fulfill it.

    5)      Unenforceable

    Any contract which appears to be valid but it is not and it does not offers any legal remedies if not fulfilled.

    Steps to Valid and Enforceable Real estate Contract

    1)      Offeror

    A party which presents an offer to another party is offeror.

    2)      Offeree

    A party which receives an offer from other party is called offeree.

    3)      Offer

    It is a proposal made by one party to other which is signed and then send it to offeree. The offer may be terminated by acceptance, counter offer, expiration of a time limit, withdral of offer before acceptance, death and insanity of any of the party.

    4)      Counter offer

    It means a conditional or qualified acceptance. Here the offeree keeps a condition or make a changes in the original offer. It must be in writing.

    5)      Acceptance

    Here the offeree agrees with the offer without any changes and conditions and it must be in writing and signed by the offeree.

    6)      Communication

    The last and final step is to communicate the acceptance to the offeror with a copy of the accepted offer.

     

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