Usually, transactions that involve buying and selling real estate properties are always expressed in writing. The most vital document in/part of any transaction is the sales contract which, in the real estate field, is also known as the purchase agreement. Although contracts can be oral instead of written, it is advisable to avoid going into oral contracts.
After investing time and finding a property that is in line with your investment dreams, you need to prepare a real estate contract that should have at least a minimum number of characteristics, features, or elements to make it valid enough for presentation to the seller (of the property).
A valid real estate contract is a written agreement between two or more individuals, entities, or corporations; it is legally binding between them in regard to an exchange of property and money or services of any kind.
Any valid real estate contract is no joke: it contains a legally enforceable set of assurances that must be executed because it (the contract) is anchored on the basics of contract law.
We’ve now known what a valid real estate contract is, but what makes a real estate contract valid? A legally binding real estate contract on any activity is valid because it has all the most important and necessary characteristics, features, or elements that empower it and make it legally enforceable on a certain activity (or activities).
The following are nine main characteristics you have to be familiar with and ensure that your valid, enforceable, or legally binding real estate contract possesses them:
1. It (valid real estate contract) consists of individuals or entities that are legally competent
Each individual who is involved in a real estate transaction must be legally competent or have some legal capacity: in most countries and states, the legal capacity is defined as being at least the legal age (usually, 18 years) and mentally matured enough to understand the consequences of taking actions.
Some of the people who are mentally ill and criminals may not be legally competent or have the required legal capacity to engage in a contract. It may even be wise to avoid dealing with people, especially older persons if they appear to have difficulty in communicating or understanding terms or things that a contract has to be founded on.
In some cases, it is important to inquire (from the person you are dealing with) whether they have a representative or someone who can act legally on their behalf.
2. It consists of an offer
The individual or entity who is interested in a property has to make an offer in writing or through written communication to the current owner or seller of the property. The offer has to clearly express the buyer’s interest and willingness to purchase the property according to specific terms.
Nearly all offers have an expiry date or time. Except an expiry date or time is included, the seller may accept an offer at any time before it is revoked or canceled officially by the interested individual (or potential buyer). On the other hand, the seller is at liberty to continue considering the offer or continue to wait or look for a better offer.
3. It consists of information that proves acceptance (of the offer)
Not all offers are accepted. If an offer is accepted, it is expressed as a positive written response that is in agreement with the exact terms stated by the buyer/potential buyer. In cases where the seller proposes changes to the terms or conditions, he may make a counteroffer and notify the buyer.
4. It may consist of a counteroffer
A counteroffer can also be referred to as a “legally new offer”; it only comes into existence when the original offer is rejected or becomes void. Sometimes, counteroffers can go back and forth between seller and buyer until both (seller and buyer) come to an agreement. At this point, the final accepted offer becomes the binding agreement between the individuals or entities.
5. It consists of an exchange
The exchange part of a real estate deal is very important to most individuals or entities; the exchange aspect of a deal involved the substitution or transfer of property and money or services of any kind, between seller and buyer.
Usually, buyers offer money, services, or something of great value to sellers who, in return, hand over ownership of property to buyers. A real estate contract would not be enforceable if each individual or entity doesn’t offer at least some form of exchange to the other individual or entity.
6. It consists of information that clearly identifies a property
All property must be clearly and unambiguously identified in order to leave no surface scratched. Usually, a legal description is used for each property. Clear identification is necessary so as to erase any uncertainty about a property that is being exchanged, sold, or transferred from seller to buyer.
7. It has a legal purpose
Most countries support legal acts and ban acts that are regarded as illegal. Your real estate contract must have a legal purpose and should not be used for illegal and immoral purposes that are against public policy. Some properties are used to carry out certain activities that violate the local prohibitions that are against operating businesses; for example, some people operate factories or similar types of businesses in residentially zoned areas that prohibit such actions.
8. Its information is stated in writing: it’s a written contract
A valid real estate contract has to be a written contract because that’s the requirement for all legally binding exchanges in real estate. All the conditions or terms surrounding the sales or purchase agreement must be done in writing, even if the contract contains minor items that don’t seem to be important.
Written contracts help to prevent or erase confusion surrounding the content that is used to describe its components or constituents. It is crucial that all relevant and consequential details be written or clearly specified in writing, and whatever is not for exchange or sale must be clearly written as well. In fact, if anything is not in writing, don’t regard it as part of the contract.
9. It is signed
A valid real estate contract must be signed by the individuals involved and have statements that describe all dates and times which are important and should not be ignored by any involved individual or entity without the written consent of the (individual or entity).
Whenever one individual’s consent is ignored or overlooked by the other individual, then the latter has breached the contract or contract terms. Once a breach of contract has occurred, the other individual or entity may be entitled to sue, claim monetary damages, or use the law to force the seller to agree to the contract terms.
Ensure that all agreements (for real estate sales) made between you and other individuals or entities are done in writing. Unless they are done in writing, do not regard them as being valid, legally binding, or enforceable real estate contracts. Without being written, they aren’t!
No matter how reasonable or convenient it may seem at the moment, never make an oral agreement of any kind on any real estate property. Most countries and laws require all exchanges in real estate to be in writing and enforceable in a court of law. They must include purchase agreements or sales contracts, and leases, and may include loans secured by mortgages or notes, commission agreements with agents, listing contracts, etc.
A contract can be declared invalid or void if it fails to possess the essential elements of a valid real estate contract. An invalid contract has no legal power and is thus unenforceable in a court of law.