4 Types of Contracts To Know In Real Estate
A real estate contract is a legally binding document that one has to be keen to understand in order to avoid falling prey to some things. The following are...
Bob is an accountant at the Kenya Commercial Bank, Nakuru branch. He has just been promoted to the level of Assistant Branch Manager in Mombasa however, he is required to report to his station within two weeks.
Alongside being an accountant, Bob is also a father of two kids and is expecting another in the coming months. This promotion has brought joy to the family but he has to make the decision whether to relocate with the family or move without them to Mombasa.
I bet Bob is not the only one who has been in this fix before, sitting on the fence between taking up a rental or a lease, some even end up blowing up worth a fortune of opportunity just because of ignorance.
Let’s try helping Bob and others too by offering them a powerful tool-Knowledge.
A real estate contract is a legally binding document that outlines terms agreed upon when two or more individuals negotiated a real estate transaction. It contains information such as the parties involved, price and terms, contingencies, acceptance date, expiring date, and homestead classification. A real estate contract aims to clarify the home buying process or renting while offering protection to both the buyer and seller.
Types of Contracts in Real Estate
- Purchase Agreement
This is a real estate contract that lays out an agreement between the buyer and seller of a specific property.
- Real estate Assignment contract
A real estate assignment contract is primarily used as a wholesaling investment strategy. If you find a property that does not suit your tastes and preferences you can secure it under contract, and “assign” that contract over to a second buyer usually at a small profit to you. The “assigns” part allows you to lock up a property with a purchase contract and pass along that property to someone else if you so desire.
- Lease Agreement
It is an agreement between two parties in which one party allows the other party to use and control the asset for a defined period without actually buying it.
- Power of Attorney
They are a type of contract that is not used exclusively in a real estate setting however, Power of attorney documents are a real estate contract and can be exceedingly helpful in certain situations. This is in the case if you’re not able to sign a real estate contract, whether because you’re out of the country or because of some mental instability hence this document gives another party the power to sign on your behalf.
Difference between a Lease and a Rent
The line of demarcation between these two terms is quite thin and blurred causing people to get confused between these two terms. Here are some of the substantial differences:
- In a rent agreement, the landlord can alter the terms of the contract, while in a lease agreement, the terms of the contract cannot be altered until the contract ceases to exist.
- Leasing is defined as a contract between the lessor and the lessee whereby the lessor buys the asset and lets the lessee use the asset for a particular period. Renting is to allow the other party to occupy or use the asset for a short time, in return for a fixed payment.
- Leasing is characterized by a long-term contraction while rent is considered for a short period of time.
- The rental agreement is renewed automatically, but this is not so, in the case of a lease.
Having information and knowledge about a problem helps one make informed concrete decisions. Knowing the difference between rent and a lease enables Bob and the likes of Bob to decide their next move. There you go, I bet you can guess what Bob decided to do.
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