How to Carry a Real Estate Contract

According to the law firm Weissman Nowack Curry and Wilco, all real estate contracts must include the purchaser's clear offer to buy and the seller's unequivocal acceptance of the offer. Real estate contracts must contain mutual agreement by both parties. These contracts usually contain contingencies that one or more of the parties to the contract must fulfill before the transaction can be consummated. If you plan going to carry a real estate contract, you must ensure the buyer is in full agreement with all the terms laid out in the agreement.

If you intend to carry a real estate contract, you must make sure the contract to which you are agreeing is for lawful purposes. According to the California Department of Real Estate, the objective is what the contract requires the parties to do or or not to do. As an example, your real estate contract may be voidable if you discover the buyer's intent is to set up a drug distribution operation or some other illegal operation.

Real estate contracts must have some form of consideration to be valid. Each party to the agreement must do something to seal their promise. If you are going to carry a real estate contract for a specified period of time, the buyer must make the agreed upon payments before title to the property is transferred. The buyer's promise is usually sealed by a down payment, and the seller's promise is fulfilled by allowing the buyer full use of the property. Once the full price has been paid, you are obligated to transfer the deed without any objection or undue delay.

There are two different title options for you to consider when you agree to carry a real estate contract. If you agree to a legal title, you as the seller retain control of the title. If you decide to retain control of the title, you also retain the responsibility to fully insure your property from all forms of loss. If you and your buyer agree to an equitable title, the buyer is considered the owner of the property and must provide insurance and pay all real estate taxes that accrue during the full contract term.

One of the most important issues is the interest rate you will offer the buyer. The interest rate should reflect the size of the down payment and the risk you undertake as the seller. Interest rates usually run from 6 percent up to 12 percent over a term of 10, 15 or 30 years. A fixed rate may provide the best means for you to ensure a consistent return on the assets you have placed at risk.