Real estate can be a complicated industry; there are many details to consider before you can move into a new home. Before a home buyer and seller can formally begin the process of exchanging a home, they must finalise a real estate contract to outline the terms and conditions of the transaction.
Below we will define the most important ones and what each one is for.
What is a real estate contract?
A real estate contract is a document that is used to set out the terms and conditions of a sale, lease or any other type of real estate transaction. The real estate contract must be in writing and must be signed by all parties involved.
What is included in a real estate contract?
In order for a real estate contract to be valid, it must comply with the requirements set out in the Real Estate Lease Contract Law. This law states that the lease contract must be in writing and must contain, as a minimum, the following clauses:
- Identification of the parties: name, address and contact details of the lessors and lessees.
- Identification of the property: address and characteristics of the property.
- Duration of the contract: term of the lease.
- Amount and method of payment of rent: amount to be paid and frequency of payment.
- Other clauses: other terms and conditions agreed by the parties.
Types of real estate transactions
Depending on the type of contract required, one or the other will be handled.
Purchase and sale
Real estate transactions for sale and purchase are those in which a property is sold or bought.
Rent or lease
Rental real estate transactions refer to the purchase, sale or lease of real estate for the purpose of generating rental income. These transactions require the advice of a real estate professional and usually involve large amounts of money.
Swap
A real estate swap is a transaction in which two property owners exchange their properties.
Types of real estate contracts
For the sale of a property, the most common real estate contracts are an option to purchase and sale and purchase contracts. Other less frequently used contracts are swap contracts, lease-purchase contracts and pre-emption contracts.
1. Option to purchase contract
An option to purchase contract is an agreement in which the seller of a property agrees to reserve the property for the buyer for a specified period of time in exchange for an initial payment, also known as an option.
If the buyer decides to exercise the option and purchase the property within the specified time period, the down payment is deducted from the sales price. If the buyer decides not to exercise the option, he forfeits the down payment but has no further obligation.
2. Contract of sale
A contract of sale is a legal agreement between a buyer and a seller to buy or sell a property. In a contract of sale, the buyer pays an agreed price to the seller and, in return, the seller transfers the property to the buyer.
3. Swap contract
A swap contract is an agreement in which two people exchange property of equal value. Swap contracts are most common among homeowners looking to exchange homes, but they can also be used to exchange other property, such as vehicles, real estate or even stocks.
4. Lease-purchase contract
A lease-purchase contract is an agreement in which a tenant pays an option to the owner of a property in exchange for the option to purchase the property at a later date.
Lease-purchase contracts are common among landlords looking to sell their property and tenants looking to buy it, as they allow both parties to evaluate the property and their needs before committing to a purchase.
5. Contract of the first refusal
A first-price first refusal contract is an agreement in which a seller agrees to sell a property to a buyer for an agreed price, but the buyer has the option to back out of the purchase if someone else offers a higher price.
Contracts of the first refusal are most common in fast-moving real estate markets, where sellers seek to obtain the highest possible price and buyers seek to secure the property at a reasonable price.
Who signs a real estate contract?
A real estate contract is usually signed by the buyer and the seller.
There are some cases where an auctioneer, real estate agent or estate agent may sign on behalf of the seller or buyer with their consent. Unless otherwise stated, the seller and buyer must represent themselves and present their signatures on a real estate contract for it to become effective.
Conclusion
If you want to buy your first property or any other real estate transaction, you will most likely have to sign a real estate contract. There are many types of contracts in the real estate sector and each of them has different uses and requirements.
Therefore, having an understanding of the different characteristics will allow you to make a more reliable decision. However, you may need to hire a lawyer experienced in these types of transactions to avoid getting caught up in the fine print. Contact our tax lawyers in Barcelona by email or telephone.
