When real estate is changing hands, there is necessarily a contract involved because there is no other way for all parties to be protected before, during and after the sale. Real estate contracts may seem intimidating yet you can ease the stress and fear regarding what you may be signing by taking the time to familiarize yourself with some of the terminology you’ll encounter. You’ll want to have a full grasp of contracts or a trusted guide to review everything on your behalf before you enter into any agreements. This knowledge will help you feel confident and assist in making wise choices regarding the documents you sign. Understanding the different purposes of these styles of real estate contracts will be very beneficial to you in the long run. Here is our guide to Indianapolis real estate contracts.
Did you know that the person who claims to be buying your house may not actually be the buyer? While it may sound complicated, Indianapolis real estate contracts are often assigned to another buyer. When you see phrases such as “and/or assigns” in the buyer name section of the contract then your “buyer” may just intend to get you under contract and then sell their interest in the contract for a fee to another buyer who will become the actual end buyer. In this way, real estate investors facilitate sales as a wholesaler between the seller and the end buyer. This process isn’t illegal (yet) although it can definitely carry with it some muddy waters if the wholesaler isn’t being up front with you about what they’re doing. It also carries a risk with it because you don’t have the opportunity to vet the end buyer to ensure they can close on the purchase, and many wholesalers don’t have the money to close the deal themselves so if the end buyer walks – you won’t sell your house and you’ll be back to square one. If you see words or phrases like “and/or assigns” but you haven’t been told that your “buyer” is wholesaling the deal – ask them about it and insist that it’s removed from the contract. At 317 Home Buyers we never put anyone other than ourselves as the buyer unless we go into the deal with the intention to wholesale it and we’ll tell you that up-front so you know what’s going on when you sell your house.
[market city] real estate contracts can also be written as “subject to” an existing loan. This is usually a special real estate contract which allows a distressed seller who may otherwise lose their property, to assign responsibility for the payments and right of ownership of the property to the buyer. As the seller you need to understand you are still responsible for the original mortgage with the lender so although the buyer has signed a contract with you that they will make your mortgage payments, if they fail to – the bank can still come after you for the money. We do purchase Indianapolis houses “subject to” existing mortgages, and we have found that it’s an easy way to help our seller’s rebuild their credit while avoiding a foreclosure, and we usually put a clause in our contract that forces us to have to refinance the loan out of the seller’s name within 24 months of us buying their house.
A purchase agreement is what may be considered the most common style of Indianapolis real estate contracts. This is a fairly simple and straightforward sale between the seller and buyer and contains all the elements of a legally binding contract. If you are working with an agent, it will likely be a state or association contract that is many pages long and may include addendums and amendments. If the sale is directly between you and the buyer such as when you sell your house to 317 Home Buyers, then you may see anything from a 1 page very minimal contract to a 3-4 page contract (ours is 3, counting the signature page).
Power of Attorney
While not extremely common, the power of attorney can be useful in real estate contracts. This is usually seen in sales where one party has become incapacitated in some way or for some other reason such as seriously declining health is unable to sign documents for themselves. Through the use of the power of attorney, the person conveys their rights to conduct business to someone else who is entrusted with their finances, an attorney, or an agent.
Don’t let intimidating contracts stop you from solving the problems you have. We’re not attorneys and aren’t here to dispense legal advice – but we do like to help educate our buyers so they can have some sense of what they’re dealing with when someone shoves a contract under their nose. If you aren’t sure about the real estate contract that your buyer is using, our advice is always to take a copy of it to a lawyer for evaluation (including our contracts). We hope you’ve found this little article useful. If you have a house or property to sell please send us a message or call 317 Home Buyers at 317-623-4734 today!