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4 Types of real estate contracts

Four types of real estate contracts play a crucial role for people who are into investing in property. As a property investor, you must know how to negotiate the terms and sign the contracts when you deal with the other party. So, the investor needs to understand different real estate contracts well.

This article will give essential knowledge about all four real estate contracts. I will also talk about real estate contracts and how to use different contracts for investing decisions.

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Real estate contract

Whenever a purchase, exchange, or any transaction relating to property or real estate takes place, the parties need a legal agreement. Different terms and conditions and all other transaction details are outlined in that agreement. This agreement is enforceable by both parties.

Real Estate Contract Law

Real estate contracts are formed to protect the transaction of real estate, but as the arrangements vary from country to country, it is necessary to hire an attorney for legal advice. This agreement also lays down the legal liability if any party refrains from doing their part of the contract.

A contract is always made when its requirements are fulfilled. And the needs of a contract include the following:


A person makes an offer to the other party. The party to whom the request is being made may accept it, reject it, or create a counter offer.


In acceptance of the offer, a contract is formed. It is only enforceable when both parties duly sign it. When the party accepts the counteroffer, the first request is over, a new agreement or contract is made, and the first one is no longer legal.


To make a contract valid, consideration should still be provided even if both parties give their offer and acceptance. Consideration is the money or any value that is exchanged between the parties. Consideration may also be in the form of a promise between two parties to pay the same amount later.

Parties’ legal capacity

Both the parties going to get into the contract must be legally capable of agreeing. Legal capacity means that they should not be of unsound mind at the time of the agreement, or none of them should be minors. In both situations, a person is incapable of thinking about the consequences of their actions.

Four Types of real estate contracts:

We’ll talk about four types of real estate contracts based on different real estate transactions.

Purchase Agreement

A purchase agreement is made between the parties when a sale occurs between them. One of the parties is the property buyer, and the other is the property seller. And to make their contract binding, the agreement is called a “purchase agreement” or “sales contract.”

Purchase Agreement type of real estate agreement

The agreement contains the identities of both parties; their names; addresses; the description of the specific property; consideration; important details and rights of that property; type of deed, which means either its sale, exchange gift, or any other deed; terms of possessing the property; and the date on which the contract is finalized.

Lease agreement

A lease is an agreement between a landowner and a tenant. In a real estate contract, the lease agreement is between the lessee and the lessor in which the tenant keeps possession of the property of the landowner and, in exchange, pays the price.

Lease Agreement types of real estate agreement

The fare can be paid monthly, half-yearly, or yearly. It depends on the conditions of the agreement. The agreement may say you must pay an extra amount instead of paying for utilities or putting down a security deposit. This agreement keeps the relationship between landowner and tenant strong and keeps it away from any irregularity.

Power of attorney

An attorney is a person or a third person who the principal appoints. A principal in the property is the person who is an actual party to the contract. A power of attorney is used when the principal is not physically present to sign the real estate contract. In place of the principal, the attorney signs it.

Power attorney types of real estate contracts

A power of attorney is used when a person is not physically present in the country where the contract is taking place, the principal is of unsound mind, the principal is hospitalized, or he has other investment properties.

Real estate assignment contract

A real estate assignment contract is formed when the property owner sells the property’s rights to purchase, which are sold to the investor. Then the agreement is initiated between both parties.

Real estate assignment contract

In this agreement, only the rights to the property are sold to the investor, not the whole property. Investors then sell the rights to another buyer who pays the amount to the investors. The new buyer has the right to the property title, so the deal is done, but the assignment investor does not join the chain.

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