4 Types of Real Estate Contracts in Tennessee
One of the legal requirements when purchasing, selling, or renting a property in Tennessee is that there must be a legally binding agreement. If you are looking to buy, sell, or rent a property in Tennessee, understanding the different types of real estate contracts in the state can help you navigate the process confidently and avoid legal pitfalls.
Below, we discuss four of Tennessee’s most common real estate contracts.
Purchase and Sale Agreement
This is the most commonly used real estate contract in Tennessee. A purchase and sale agreement is associated with the purchasing and selling of a property. This agreement outlines the terms of the transaction, including the price, parties involved, earnest payment, contingencies, and closing date.
Both parties (seller and buyer) must sign the contract for a purchase and sale agreement to be considered legally binding.
Lease Agreement
A lease agreement is a legally binding contract drafted between a lessor (landlord) and lessee (tenant) outlining tenancy terms and conditions. There are different types of lease agreements, including commercial, residential, and rent-to-own agreements (discussed below). Lease agreements outline terms such as the monthly rent, lease duration, maintenance responsibilities, and termination procedures.
Rent-To-Own Lease Agreement
This is a type of lease agreement with additional terms enabling the tenant to purchase the property during the lease period under certain conditions. The lease includes negotiated terms related to the purchase of the property. If the tenant chooses not to purchase the property, the lease is terminated normally. Typically, buyers pay a non-refundable option fee for this right.
Contract for Deed
In Tennessee, a contract for deed is also known as a land contract. This contract allows the buyer to pay the seller over time until the agreed-upon amount is cleared. The seller retains legal title until the buyer finishes making payment. This differs from traditional mortgages, where the buyer typically receives legal title at closing, and the property is used as collateral for a loan provided by a third-party lender. With a contract for deed, after the buyer makes the final payment, legal ownership of the property is transferred to them. If a seller defaults on payment, the seller retains the right to repossess the property.
Real Estate Assignment Agreement
This is a common option among investors. A real estate assignment contract allows buyers to transfer their rights under a purchase agreement to another buyer. Typically, the end buyer pays the original buyer a fee for the assignment.
In Tennessee, real estate contracts must be drafted and reviewed carefully to ensure they meet state requirements and protect the rights of involved parties. Whether you are entering a purchase & sale agreement, lease, rent-to-own contract, or assignment agreement, having an experienced real estate attorney on your side can ensure the transaction goes smoothly and help prevent mistakes that can lead to disputes.
Contact a Knoxville Real Estate Attorney
Our Knoxville real estate attorney at Reynolds, Atkins, Brezina & Stewart, PLLC, can help you with drafting and reviewing your real estate contract. Contact us today to schedule a consultation.
