Are you new to the trade of real estate investment in Little Rock? If so, you are likely asking questions about how real estate investing works and, more specifically, what Little Rock real estate contracts are. As a real estate investor, you will be negotiating and signing real estate contracts each time there is a deal at hand. Because you will likely be dealing with real estate contracts on a regular basis, it’s important to become familiar with the terminology of these contracts and learn what exactly is involved during the process.
Understanding how real estate contracts work during transactions is both helpful and necessary, especially as you expand your investment business. By familiarizing yourself with Little Rock real estate contracts, you can be confident in the choices you make as you purchase houses in Little Rock, Arkansas.
Ready to uncover the different styles of real estate contracts? Here is our ultimate guide to Little Rock real estate contracts.
Real Estate Assignment Contract
Real estate assignment contracts, mainly used in wholesaling investment strategies, are contracts assigned to a second buyer. In other words, this type of Little Rock real estate contract facilitates the sale of a property between an owner and an end buyer. Signing a real estate assignment contract as a real estate investor simply portrays the rights you have to purchase the home.
In most cases, real estate investors will assign the contract to another real estate investor who, in return, pays a small assignment fee and proceeds with the purchase of the house from the original buyer. This process is especially beneficial to real estate investors who want to purchase a distressed house but aren’t interested in doing expensive repairs.
“Subject To” Real Estate Contract
Another form of Little Rock real estate agreements is the “subject to” contract. A “subject to” real estate contract is basically an agreement in which a real estate investor buys a property subject to the existing mortgage already in place. This method allows the ownership of the property to remain with the seller. The seller will still manage the original mortgage with the lender, as well as assign payments and right of residency to the buyer for the “subject to” contract. Because the buyer is under no obligation to the lender, it is possible for the property to foreclose if the seller fails to make the payments.
“Subject to” real estate contracts are often given to sellers who are facing significant financial debt or are experiencing a financial downturn. You may also use this method of Little Rock real estate contracts if you’re considering investing in a home with existing equity or even houses with minimal equity. Whatever the case may be, a “subject to” real estate contract is an investment strategy ideal for both the experienced and novice real estate investor.
A purchase agreement, also known as a sales contract, is the most common type of Little Rock real estate contracts. As the name suggests, a purchase agreement is a contract between the buyer and seller over a specific property. If you choose to work with an agent, this agreement may be a state or association contract. Otherwise, the general purchase agreement will be used if the sale is directly between the seller and buyer.
In some cases, neither the standard purchase agreement nor the state/association purchase agreement will be used. In such circumstances, the property-specific purchase agreement is the most preferred form. This method is ideal for real estate investors buying a property outside the traditional single-family properties, though it also depends on the market in Little Rock.
If you’re interested in becoming a landlord over a specific property, your Little Rock real estate contracts will include lease agreements. A lease agreement guarantees the use of the property to the tenant while providing you with a consistent flow of monthly income. This form of Little Rock real estate contract is carefully laid out to avoid issues between the landlord and tenant. Additionally, important considerations are made including the rent amount and security deposit.
Power of Attorney
Although it is not commonly thought of in Little Rock real estate contracts, the power of attorney is a form of real estate contract that can be extremely useful in certain situations. A power of attorney document allows you to convey your rights of conducting business to someone who is entrusted with your finances, your attorney, or your agent.
A power of attorney document comes into play when the owner is unable to sign a real estate contract. This may be due to the owner being currently unavailable or due to health issues. Either way, the principal or party who has given permission to act on their behalf will assign someone else to sign the contract in that person’s stead.
Rent to Own
A rent-to-own document is a type of real estate contract that allows a buyer to rent the property for a specified time period before gaining full ownership. During this time period, the seller receives monthly rent, as well as additional payments. Depending on the specifics of the contract, a rent-to-own agreement may rent property to a potential buyer for several months or even years. Because you’ll be collecting monthly rent, rent-to-own can be a valuable investment for real estate investors in Little Rock.
There are two kinds of rent-to-own agreements: the lease-option agreement and the lease-purchase agreement. A lease-option agreement gives the renter the choice to purchase the house, whereas the lease-purchase agreement has a legal obligation that the renter purchases the house. The latter type of rent-to-own agreement is most preferred among sellers, as it guarantees a purchase after a certain time period. Furthermore, this strategy gives the buyer time to build savings toward a deposit as well as find financing. With a lease-option agreement, on the other hand, the buyer is not obligated to purchase the property after renting it for the specified timeframe, and thus may not result in a final sale.
While Little Rock real estate contracts may seem intimidating, they can prove to be valuable to your investment business. If you’re seeking professional guidance for getting started on real estate contracts, Little Rock Property Buyers is here to help. At Little Rock Property Buyers, we’re more than happy to provide you with the information you need to become familiar with Little Rock real estate contracts. Simply give us a call today at 501-580-3035 or message Little Rock Property Buyers online to learn more about Little Rock real estate contracts.