LEGAL CONTRACT SERIES: ELEMENTS OF A CONTRACT

As a real estate enthusiast, investor or practitioner- your success or ability to thrive in the real estate industry depends on how frequently you increase your knowledge and skills. We will be deep-diving into the technical legal aspects of being a professional real estate investor.

The core of our series will be on legal documents, and knowledge of contracts a practising real estate enthusiast must be aware of.

 

First, what is a contract?

A contract is a LEGALLY ENFORCEABLE AGREEMENT between 2 or more parties that creates an OBLIGATION to do or not to do a particular thing.
It is an exchange of promises that the law will enforce.

 

What are the elements of a contract?

 We will take each of these elements one after the other and for today we shall focus on the first element.

The first element of a contract is an OFFER

An offer is a promise to act or refrain from acting, which is made in exchange for a return promise to do the same.

A buyer’s power of acceptance is created when the seller conveys a present intent to enter a contract in certain and definite terms that are communicated to the buyer.

Like marriage, acquiring a space (lease or outright buying) is one part love, one part legal transaction, and starts with a proposal. When brokering the transaction for your client making an offer is important: oral promises are not legally enforceable in a real estate sale.

Below are 2 more duties you have as an agent to your client:

1.    Act with prudence in the Client’s interest: You have to put your client’s needs over your personal gain, this way you become known for your integrity and increase your client base.

2.    Duty to account to the client: Any and all plans to front-load the price of a property must be revealed to the Client (whether buyer or seller). This is part of the Duty to account.

How to make a good offer

If you’re in the process of shopping for a home, you likely want to know how to make your offer stand out from the crowd. Today, I’ve decided to go over four components that you can use to your advantage when putting together a strong offer. Read on below to learn how to put together an offer that will undoubtedly capture the sellers’ attention.

Offer Price                                                                                                                            

This is the one component of an offer that everyone knows about, even if they’ve never been through the pr0cess before. However, as the buyer, it might be less of a big deal than many people make it out to be. From the sellers’ perspective, the offer price makes a huge difference. The proceeds that they receive at settlement are the only benefit that they get from the sale of their home. That money could be what they’re relying on in order to purchase their next home or to carry them through retirement. It’s likely that they have a firm bottom line that they need to meet. However, as the buyer, you’re a bit more protected from the impact of a higher offer price. Any increase in price will be rolled into your mortgage and you’ll pay for it over the life of the loan. It will likely only make a small difference in your monthly payment.             Keep this in mind as put your offer together. While you ultimately have to be comfortable with the amount you agree to pay, if you love the home, it may be worth it to be more flexible on the offer price to put yourself in a better bargaining position. 

Earnest Money Deposit                                                                                                     

The next thing that you’ll have to decide is how much money you want to put towards your earnest money deposit. This money is essentially a downpayment on your downpayment. It shows the sellers that you’re serious about buying the home.  This money is taken at the beginning of the transaction and held in escrow until you go to closing. If you meet the terms of the contract and follow through with the sale, that money will be applied to your downpayment. If, however, you break the contract, the seller can keep your deposit money in exchange for the loss of the deal. Typically, earnest money deposits range between 1% to 3% of the sale price. However, you’re able to put as much money down as you’d like. If you want to show the seller that you are particularly interested in buying the home, putting down a larger deposit can help get that point across. 

Contingencies                                                                                                                        

 As the buyer, contingencies are mostly for your benefit. In short, they account for anything that needs to happen in order for the transaction to continue moving forward. Though you can write your own into the contract, these usually account for things like conducting inspections or acquiring financing. Sellers are wary of offers with too many contingencies because each one offers the buyer an opportunity to exit the sale, so keep that in mind as you put your offer together. That said, contingencies are designed to help you move forward with the sale feeling as informed and prepared as possible. Make sure that you select as many as you need in order to feel confident buying the home. 

Closing Date                                                                                                                   

The closing date is the last piece of the offer to consider. You may have a specific date that you need to move, especially if you’ve already sold your old home. However, if you aren’t tethered to a particular date, it can be a good bargaining tool. You can make your offer stronger by matching the sellers’ desired timeline.

Sources: Forbes, G2.COM, Law.cornell.edu

OUR ESTATE LOCATION:

Abuja, Asaba, Enugu, Uyo, Calabar, Port Harcourt, Ibadan, Benin, Warri, Osogbo, Ota, Awka, Owerri, Umuahia, Abakaliki, Epe, lagos, Abeokuta, Ogun and nationwide

SMS, Call or WhatsApp: 07030765952

bikejoseph@gmail.com

https://joenigeria.blogspot.com

For DailyProperty listing In Uyo

For our products and services

For updated landlistings nationwide

For more information about Joe Nigeria

IBOM E-LIBRARY provides the following rentals services: Conference hall for meetings, summits, workshops, seminars etc. We also have office spaces, Board rooms, a CBT centre, academic and Outdoor spaces for rent Location: Along IBB Way Uyo. Contact: 07030765952