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Contracts for real estate

Published on March 31, 2024   8 min

A selection of talks on Finance, Accounting & Economics

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0:00
Hello again. Welcome back to real estate economics. I'm John McDonald, Emeritus Professor of Economics at the University of Illinois, Chicago, and Emeritus professor of real estate at Roosevelt University. This is the third lecture in our series and the last one on the legal aspects of real estate. Today's talk is about contracts for real estate.
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Previously we did the forms of ownership. We're concentrating on the maximum ownership rights that one can possess, that we called the Simple Estate. Now, there are, however, even with maximum ownership, limitations on ownership, you have to pay your taxes, you have to be using the real estate for legal purposes naturally, and you are also subject to what is called eminent domain or compulsory purchase when the government needs to obtain your property for a public purpose. Today, we're doing contracts. We're going to start with the contract for sale. It's said that the sales contract is the most important contract in real estate, but there are several other contracts that we will touch on briefly.
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The sales contract, what are the basic requirements for a sales contract in the application of the law of contracts? First of all, parties must have legal objectives, naturally, and are competent to act. Competent, namely the person who's selling actually owns the property and that the party is of legal age. Now, that's just start, there is offer and acceptance. All legal contracts have an offer and an acceptance of that offer. Not only that, there is a statement of consideration. In other words, value given or promise made by both of the parties. Each party is making a promise or giving something of value in exchange for what they are receiving from the other party. There is no defect to mutual agreement i.e., no one is under duress that you are free to make the deal that is being described in the contract. Finally, in real estate, the contract for sale must be in writing, including the legal description of the property that we talked about briefly in the last class. Now, that legal description is complicated, it really has to be in writing and then of course signatures of the buyer and the seller. These are the basic contract for sale and there are several other contracts in real estate, and contracts in general as well for things other than real estate.

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