Are you studying for your real estate exam or getting into other types of real estate and wondering what an executed contract is? We explain everything below!
What Is an Executed Contract in Real Estate?
Legal terms can be too difficult, but don’t worry. An executed contract is quite simple.
Execution can mean two things: one, to complete a legal document, and two, to fulfill its requirements through signing and sealing the agreement.
Executing contracts mean the people involved sign the agreement. Both parties must fulfill their obligations for a real estate contract to become executed.
The buyer and seller must agree first. In this sense, people signing the documents together is merely a step towards completion.
Full execution of a document must involve the success of paying and passing over the title.
What Kind of Real Estate Sales Contract Does Execution?
If you’re wondering when you might encounter a real estate contract that does execution, this is the place. The truth is, most real estate contracts need execution.
You may come across real estate contracts like a lease contract, purchase contract, sales contracts, and other legal documents that have business between parties involved.
Things to Remember With An Executed Contract
If you get an executed contract or a similar agreement, there are some things you must remember. Keep in mind the following considerations:
You may see oral contracts as valid, but some states may not. Some only enforce a contract when it’s written. So first, make sure all the terms are in writing!
Then, both the buyer and the seller must agree to the contract terms.
In some states, you may have to provide documents proving there was an offer from one party and offer acceptance. Both of these documents show that the entities involved provided mutual consent.
Speaking of the people involved, each party must be of legal age when they sign the contract. Of course, the document must be legal as well.
Both parties must exchange “consideration” during this transaction. It can refer to the property at its purchase price.
Terms and Conditions
If you’re one of the parties involved, read the fine print of every contract you come across. Avoid confusion, disagreements, and legal issues.
If ever one party wants to change something about any term in the contract, they can only do so after both parties have agreed. They must agree and give their signatures to recognize the new terms.
Whether you’re a buyer or a seller, do yourself a service and keep a copy of the contract – even multiple copies if possible! If an issue arises, you can refer back to the contract at hand.
You can also use a copy of the contract to sue the other entity if they don’t fulfill their obligations.
If someone pledges their car title, lot, or some other possession as collateral and doesn’t pay back in time, an attorney can refer back to the terms.
What was the effective date? What about the execution dates? Were repossession and refinancing agreed upon?
Remember, you’re dealing with real estate and a lot of money. While your case may vary, it still helps to keep the above in mind.
The Execution Date
In a contract, you may find both the effective date and the execution date.
The execution date is the date both parties sign the real estate contract. The effective date can be much later when the contract is complete.
For example, I may sign a lease to move into a new condominium today but, I can only move into the property the week after. Today can be the execution date, but when I move into the brand new property is the effective date.
Fully Executed Vs. Executory
You may see some of your peers saying that the term “fully executed” is different from referring to an “executory contract.” We explain the difference below.
What’s An Executory Document?
You have an executory contract when obligations are yet to be completed. Everyone involved may have read all the terms and signed the contract, but nothing is carried out.
However, this doesn’t mean that the contract isn’t binding. Once it has the signatures, it’s become legal and good to go.
What’s a Fully Executed Document?
So, what happens when the terms are carried out? You have a fully executed contract! It’s legal, binding, and everything has changed hands. You’re all good to go!
To Sum It Up
An executed contract means that everyone has signed on and all the terms are fulfilled. In our example above, a lease agreement may still be executory if it just has the signature.
However, in that same example, the agreement becomes executed as soon as the buyer has moved in.
While an executed contract is easy to understand, remember to check the validity and terms before committing to anything. Read each sentence carefully!
We hope you enjoyed this guide. Whenever you feel confused, treat this article as a menu for the definitions you’re looking for.