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by: Jeff Beaubien
What is a Contract?
A contract is an agreement between two or more persons (individuals,
businesses, organizations, or government agencies) to do,
or to refrain from doing, a particular thing in exchange for
something of value.
What are the Key Elements to a Binding
Real Estate Contract?
- Offer and Acceptance: Original signatures with
no alterations to the contract. If the original offer is
marked up and initialed by the party receiving it, then
signed, this is not an offer and acceptance but a counter-offer.
Any final agreement should be reduced to a final writing
and signed by both parties.
- Consideration: A bargained for exchange of something
of value. Money is the most common form of consideration,
but a promise to perform (i.e. a promise to pay) is also
satisfactory.
- In Writing: A real estate contract must be in writing
and it must:
- Identify the Parties: The full name of the parties
must be on the contract.
- Identify the Property: At least the address, but
preferably the legal description must be on the contract.
- Purchase Price: The amount of the sales price or
a reasonably ascertainable figure (an appraisal to be completed
at a future date) must be on the contract.
- Signatures: A real estate contract must be signed
to be enforceable.
- Legal Purpose: The contract is void if it calls
for illegal action.
- Competent Parties: Minors, mentally impaired, drugged
persons, etc. cannot enter into a contract.
- Meeting of the Minds: Each side must be clear as
to the essential details, rights, and obligations of the
contract.
What is a Lease Purchase Contract?
A lease purchase contract combines a basic lease contract
with an option-to-purchase contract. The tenant/buyer pays
to the landlord/seller a non-refundable option deposit that
is applied to the purchase price of the home. The tenant/buyer
then pays to the landlord/seller a sum that is typical to
the rental amount usually on a monthly basis. A portion of
that monthly payment is then applied to the purchase price
of the home. During, or at the end of the lease period, the
tenant/buyer has exclusive right to buy the home under the
terms to which both parties have previously agreed.
In other words,
| Lease + Option to Purchase
= Lease Purchase |
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