Not all Real Estate Contracts Are Created Equal: Here’s the Difference

Real estate transactions revolve around written agreements or contracts. There are essentially four major types of real estate contracts, and they each have their different uses and stipulations. As in any legal transaction, these contracts are necessary to execute the sale.

Not all real estate contracts are created equal, so it’s important to know what you’re really signing.

Here are the differences in the main types of real estate contracts:

Purchase agreement

As the most common type of real estate contract, a purchase agreement lays out the agreement between the buyer and seller of a specific property. This contract will include the purchase price, signatures, party identification, and the closing date for the transaction. Although this seems simple enough, there are different types of purchase agreements that you need to be aware of:

  • State/association purchase agreement: This is a standardized purchase agreement used by many states, and the realtor associations that serve the local markets, to guide their transactions.
  • General purchase agreement: This is a great option if you’re working directly with sellers and not through a real estate agent. It’s basically a stripped down, much shorter version of the state/association purchase agreement.
  • Property-specific purchase agreement: The only time you should have to use a property-specific purchase agreement is if you’re buying a property outside of the traditional realm, like a mobile home or a piece of vacant land.

Real Estate Assignment Clause

Similar to a regular purchase agreement, a real estate assignment has the addition of a few extra words. It’s used in wholesaling investment strategies, in which you find a distressed property, secure it under contract, and “assign” the contract over to a second buyer. So, an assignment clause gives you the opportunity to lock in a property with a purchase contract while passing along the property to someone else if you so wish. As an investor, this type of contract provides you with a large amount of flexibility.

Lease agreements

If you’ve ever rented a property before, you’re probably familiar with lease agreements. This is simply an agreement that specifies important considerations, such as the rent amount, the security deposit, and how utilities should be handled.

Real estate contracts shouldn’t be overwhelming or confusing. They benefit and protect both the buyer and seller, so it’s important to understand the types of contracts available and the best situations for using them.

If you are ready to put your house on the market or are looking for your dream house, let us help. At Drew Kern Real Estate, we are experts in the South Florida market. Give us a call at 305-329-7744 and come meet us.