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RAMAKRISHNA NALLATHIGA
ASSOCIATE PROFESSOR
NICMAR PUNE
Structure
Introduction
Essentials of Purchase Contract
Ringer, Binder and LoI
Types of RE Contracts
Installment Contracts
Option Contracts
Introduction
Real Estate Contract arises so as to make the transaction
Both buyer and seller make promises for delivery and this
Introduction
Purchase Contract, also known as deposit receipt, offer and
Installment Contract
Installment Contract is also a method of selling and financing
property whereby the seller retains title but buyer takes possession
while making the payments
Installment contract (or conditional sales contract/contract for
deed/agreement of sale) combines the features from sales
contract, deed and mortgage. It is a contract wherein the seller
delivers deed at a future agreed date
When the buyer does not have full purchase price in cash or not
able to borrow, the Seller may accepts a down payment and
monthly payments. The Seller can then choose to:
Either deliver a deed to the buyer at the closing and at the same time take back
from the buyer a promissory note and a mortgage secured by the property (a
mortgage carry back)
Or enters into an installment contract wherein the buyer makes required
payments to the seller before the seller delivers a deed to the buyer
Option Contracts
Option Contract, unlike earnest money contract, is unilateral,
executed contract
Once the contract is executed, the buyer has the right to purchase
the property with no obligation to do so
The seller on other hand has obligation to sell in the event of
contract execution
Most of the option contracts involve cash payment rather than any
deposit payment
Option contracts are suitable to buyers who hunt for multiple
properties use this as an instrument to zero in on a property
Option Contracts are made for a fixed option period (usually 60
days) and if the option is not exercised during it, the contract gets
terminated by its own terms
Option Contracts
Lease-Option to Buy
References
Charles Jacobus, 2010, Real Estate Principles,
Cengage Learning