How to Write a Real Estate Investment Contract
Writing a real estate investment contract can be a very simple process. Similar to other investment contracts, the purpose of this document is to describe the offer being proposed between parties. Although, these agreements can be entered into verbally, contracts provide a valuable element of accountability. They also serve as clarification so that everyone involved is aware of their obligations should the contract be enacted.
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Instructions
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State Names and Establish a Beginning Date
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Set a date for when the contract becomes valid and identify the parties involved in the first portion of the contract. If the property is held by a company, then you'll want to state the name of the company. Your investment contract should be directed specifically toward the current property owner.
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Identify the property being referred to within the contract in very specific terms. This means that you should state the common address (if one exists), lot number or parcel number of record. This way there can be no discrepancy concerning the property being referred to in the contract. Any confusion regarding the property in question may lead to a myriad of problems including purchasing the wrong property and possibly having to pay taxes on a property that holds no interest to you.
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State your offer regarding the property. If your offer to purchase requires any stipulations, these should be explicitly outlined within the document. For example, if you are willing to purchase a particular property contingent on the owner removing a tree, then this clause must be clearly stated in the proposed agreement.
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Set a date by which the contract is no longer valid. Real estate values fluctuate over time so it is necessary to establish a life span of the proposed agreement. Your contract cannot predict future trends and can only reflect the current terms under which you are willing to invest. Setting an end date for a contract offers some protection against unforeseen future developments that could adversely affect the offering price.
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Tips & Warnings
Research the circumstances surrounding the particular property before presenting an offer to invest.
Find out everything that you can about the current property owner. This information is necessary in order know the type of offer that is most likely to be accepted.
Timing is vital to the success of any investment so, play close attention to the lifespan of your agreement.
Perform a title search to find out if the property is encumbered by any sort of debt as this may affect the price that you will end up paying in the end.
Be ready to walk away if the current owner does not want to concede to the terms that you have outlined. Often times, owners add sentimental value to the price of real estate and unless you're willing to pay extra to comfort them, be content to walk away without a deal.
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