Real Estate Contracts And Their Importance

Steve Smith
Apr 17, 2020   •  1 view

Why are Real Estate Contracts Required?

The economic impact of any contract is to shift the danger from one party to another. In a real estate contract, you define how the contractor should develop the property. The catch is that developing a property is a long-term engagement. Without a written contract, as time passes, the possibility for non-performance increases. Without written evidence to enforce the original agreements, it is just a he-said-she-said argument.


The risk, however, need not be turned totally from one party to another. Generally, it is allocated so that any party shares the uncertainty in the contract. If the risk exceeds the sustainable limits, it is assigned to either party alone. For this purpose, every provision in a construction contract can be interpreted as a mechanism for shifting the risk.

A real estate agreement outlines the terms of commitment between the client and the developer. It helps in charting out a plan of action to have ensued for the duration of development. This is a great way to give expectations between the developer and the client. Because of how effective the changes in property development are, it is supposed to be prepared after exercising due care.

Writing a construction deal can be tricky because you have to envisage and quantify so many things that are abstract yet. Much of the contract is based on guesswork quantified because the specifications can be volatile. If you don’t have much experience in drafting agreements and but are entering into a construction contract for the first time, it can prove to be quite a hurdle.