Types of Real Estate Contracts: Complete Guide for Property Professionals

Property transactions involve multiple parties, complex negotiations, and significant financial commitments. Whether you’re closing a commercial sale, managing rental properties, or coordinating between buyers and sellers, understanding which types of real estate contracts apply to each situation protects your interests and prevents costly disputes.

This guide covers seven essential real estate agreements every property professional should know, when to use each contract type, and how proper real estate contract management keeps your transactions organized and compliant.

What is a real estate contract?

A real estate contract is a legally binding agreement between parties involved in a property transaction. These contracts in real estate establish the terms, obligations, and rights for buyers, sellers, landlords, tenants, and agents participating in property sales, leases, or service arrangements.

The core purpose of property contracts is to protect all parties by documenting agreed-upon terms, creating legal enforceability, and providing clear recourse if disputes arise. Real estate agreements differ from other contracts because they involve significant assets, require specific legal formalities, and often must comply with state-specific regulations.For example, a buyer and seller entering a purchase agreement for a residential home establish the sale price, closing date, inspection contingencies, and financing terms. Similarly, a commercial landlord and tenant signing a multi-year lease define rent amounts, maintenance responsibilities, and use restrictions. Both scenarios require written documentation to be legally valid, underscoring the importance of contract management throughout the property lifecycle

Understanding this binding nature explains why property professionals invest significant time ensuring contract accuracy before signatures.

What are the different types of real estate contracts?

Property professionals encounter seven distinct contract types throughout the real estate lifecycle. Each serves a specific purpose and includes unique terms tailored to different transaction scenarios.

1. Purchase agreement

A purchase agreement is a contract between a buyer and seller that outlines all terms of a property sale. This real estate sales contract legally binds both parties to the transaction and protects their respective interests throughout the buying process.

Purchase agreements serve as the foundation for property transfers, establishing the purchase price, closing date, earnest money deposit, and contingencies that must be satisfied before the sale finalizes. Drafting purchase agreements requires attention to detail since any ambiguous terms can lead to disputes or failed transactions.

Key components included in purchase agreements:

1. Purchase price and payment terms: Total sale amount, deposit requirements, and payment schedule
2. Closing date: Specific date when ownership transfers and funds exchange
3. Property description: Complete legal description, including address, parcel number, and boundaries
4. Contingencies: Conditions that must be met, including financing approval, satisfactory inspection results, and appraisal at or above the purchase price
5. Earnest money deposit: Good faith deposit demonstrating buyer’s serious intent
6. Seller disclosures: Required property condition statements and known defects

When to use purchase agreements

Any property sale transaction, whether residential or commercial, requires a written purchase agreement. These real estate sale contracts apply to single-family homes, condominiums, multi-unit buildings, land purchases, and commercial properties.

Common purchase agreement variations

Property-specific purchase agreements address unique features, like historic properties or waterfront homes. General purchase agreements use standard forms for most residential transactions. State and association forms, like the one-to-four-family residential contract, incorporate state-specific legal requirements.

What type of contract is a real estate sales contract? It’s typically an executory contract in real estate, meaning both parties have ongoing obligations to fulfill before the transaction completes.

Understanding different types of real estate sales contracts helps you navigate various transaction scenarios, and a thorough contract review ensures all terms protect your position before signing.

2. Lease agreement

A lease agreement is a long-term rental contract between a landlord (lessor) and tenant (lessee) that establishes all terms governing property use over an extended period. These property agreements typically span one year or longer and lock in rental terms for the entire duration.

The core purpose of lease agreements is to provide stability for both parties through fixed terms. Landlords secure predictable rental income, while tenants gain housing or commercial space security without unexpected rent increases or displacement during the lease period.

Key components in lease agreements:

1. Lease duration and renewal terms: Specific start and end dates, with options for extension or conversion to month-to-month
2. Monthly rent and payment schedule: Fixed rental amount, due date, accepted payment methods, and late fees
3. Security deposit terms: Deposit amount, conditions for return, and allowable deductions
4. Maintenance responsibilities: Clear division of repair obligations between landlord and tenant
5. Use restrictions and rules: Permitted property uses, occupancy limits, pet policies, and community rules

When to use lease agreements

Long-term residential or commercial rentals benefit from leases when both parties want stability and fixed terms. Managing lease renewals becomes critical as expiration dates approach.

The tenant experience during lease execution significantly impacts long-term success. According to Zego’s 2025 Resident Experience Management Report, 75% of renters rated their move-in experience as either extremely or somewhat positive, and renters who rated their move-in experience positively are twice as likely to renew their lease. This data underscores why clear, well-structured lease agreements that set proper expectations contribute directly to retention.

Residential lease types

Residential leases cover apartment rentals, single-family home leases, and condominium agreements with tenant protection provisions.

Commercial lease types

Commercial leases vary significantly based on expense responsibility:

• Gross leases: Landlords pay all operating expenses
• Net leases: Tenants pay some expenses
• Triple-net leases: Tenants pay all taxes, insurance, and maintenance
• Ground leases: Tenants lease land only

For transactions where tenants need long-term land access without purchasing property outright, a land lease agreement provides a specialized structure with terms typically spanning 10 to 99 years.

Specialized lease arrangements

Lease-to-own agreements combine rental and purchase, allowing tenants to apply rent credits toward eventual property purchase. Sublease agreements permit tenants to rent the property to another party while remaining responsible to the original landlord.

Property managers tracking lease performance should understand industry benchmarks. According to MRI Software’s 2024 property management analysis, the average resident retention rate in the United States in 2023 was 56%, with rates above 60% considered good and rates closer to 70% or higher deemed ideal. These benchmarks help property professionals evaluate whether their lease structures and renewal strategies perform competitively.

Understanding these different types of real estate contracts helps property managers and investors structure appropriate agreements for each situation. Proper legal contract management ensures all parties comply with their obligations throughout the lease term.

3. Rental agreement

A rental agreement is a short-term rental contract that operates on a month-to-month basis rather than a fixed long-term commitment. Unlike leases, rental agreements automatically renew each month unless either party provides proper notice to terminate, typically 30 days in advance.

The primary purpose of rental agreements is to provide flexibility for both landlords and tenants. Either party can end the arrangement with relatively short notice, usually 30 days, without breaking a long-term commitment or incurring penalties.

Key rental agreement components:

1. Monthly term and renewal process: Agreement renews each month automatically until proper termination notice
2. Rent adjustment flexibility: Landlords can increase rent with appropriate notice, typically 30-60 days, depending on state law
3. Termination notice requirements: A Specific number of days’ notice is required from either party to end the tenancy
4. All standard lease provisions: Rent amount, security deposits, maintenance responsibilities, and use restrictions apply
5. Payment terms: Due date, late fees, and accepted payment methods

When to use rental agreements

Rental agreements work best for short-term housing needs, transitional living situations, or properties where landlords want flexibility to adjust terms frequently. Property owners testing rental markets or planning renovations benefit from month-to-month arrangements.

Rental agreement versus lease agreement

The distinction matters for both risk management and contract negotiation strategies. Rental agreements offer maximum flexibility but less security, while leases provide stability through locked terms and longer commitment periods.

4. Listing agreement

A listing agreement is a contract between a property owner and a real estate agent or broker authorizing the agent to market and sell the property. This agreement establishes the agent’s authority, commission structure, listing period, and specific marketing obligations.

The primary purpose is to create a legally binding relationship defining how the property will be marketed, what the agent earns upon successful sale, and each party’s responsibilities throughout the sales process.

Types of listing agreements:

1. Exclusive right to sell the listing

This gives one broker the exclusive right to earn commission regardless of who finds the buyer. Even if the owner sells the property themselves during the listing period, the broker still earns the agreed commission. This arrangement motivates brokers to invest maximum marketing resources since they’re guaranteed compensation for any sale.

2. Exclusive agency listing

One broker receives exclusive marketing rights, but the owner retains the right to sell the property themselves without paying commission. The broker only earns commission if they or another agent in their brokerage brings the buyer.

3. Open listing

Multiple brokers can market the property simultaneously, with commission going only to the broker who brings the successful buyer. The owner also retains the right to sell independently without paying commission. This arrangement typically results in less aggressive marketing since brokers compete for the same property.

4. Net listing

The owner sets a minimum acceptable sale price, and the broker keeps anything above that amount as commission. Many states prohibit net listings due to potential conflicts of interest where brokers might prioritize higher prices over owner interests.

Key listing agreement components:

1. Property description and listing price: Complete address and asking price
2. Commission rate and payment terms: Percentage or flat fee structure, and when payment occurs
3. Listing period duration: Specific start and end dates for the agreement
4. Marketing obligations: Broker’s commitments for advertising and showings
5. Termination conditions: Circumstances allowing early cancellation

When to use listing agreements

Property owners benefit from listing agreements when they need professional marketing reach, lack time or expertise to handle sales themselves, or want competitive market analysis and pricing guidance. Understanding real estate listing contracts is part of comprehensive vendor contract management for property professionals.

5. Assignment contract

An assignment contract transfers one party’s rights and obligations under an existing real estate contract to a new party. This agreement allows the original buyer (assignor) to transfer their position in a purchase agreement to another buyer (assignee) before closing.

Real estate assignment contracts are common in wholesale real estate investing, where investors contract to purchase properties and then assign those contracts to end buyers for a fee. The assignment process requires seller approval in most cases, and the original contract often must explicitly permit assignment.

Key assignment contract elements:

1. Original contract identification: Complete details of the purchase agreement being assigned
2. Assignment fee: Compensation paid to the assignor for transferring contract rights
3. Rights and obligations transfer: Specific terms are being assigned to the new party
4. Seller consent: Written approval from the property seller, if required
5. Assignor’s continuing liability: Whether the original buyer remains liable if the assignee defaults

Key distinction: Assignment involves transferring rights, while assumption means taking on obligations. Most real estate assignments involve both, with the new party gaining purchase rights and assuming closing obligations.

When to use assignment contracts

Wholesalers use assignments to profit from finding undervalued properties without using their own capital for purchases. Investors use assignments to exit deals when circumstances change before closing. Developers assign contracts when project timelines or financing shift.

Effective contract tracking helps wholesalers manage multiple assignments simultaneously and ensure all parties meet their obligations before closing deadlines.

6. Option contract

An option contract grants a buyer the exclusive right, but not the obligation, to purchase a property within a specified timeframe at a predetermined price. This arrangement locks in the purchase price while giving the buyer time to secure financing, complete due diligence, or wait for optimal market timing.

The buyer pays an option fee for this right, which may or may not apply toward the purchase price depending on the agreement terms. If the buyer exercises the option, the purchase proceeds according to the predetermined terms. If not, the seller keeps the option fee and regains full control of the property.

Key option contract components:

1. Option period duration: Specific timeframe during which the buyer can exercise the purchase right
2. Option fee amount: Non-refundable payment for the exclusive right to purchase
3. Purchase price: Locked-in price if the option is exercised
4. Exercise procedure: Specific steps required to convert the option into a binding purchase agreement
5. Credit terms: Whether the option fee applies toward the purchase price

When to use option contracts

Developers use options to secure properties while obtaining permits and approvals. Investors use options to lock in prices in appreciating markets while arranging financing. Commercial buyers use options during extended due diligence periods.

Lease-option contracts combine rental agreements with purchase options, allowing tenants to rent while deciding whether to buy. These hybrid arrangements help buyers with credit challenges build toward homeownership while living in the property.

Contract renewal strategies often include option clauses for extending commercial leases at predetermined rates.

7. Power of attorney for real estate

A power of attorney (POA) is a legal document authorizing someone, called the agent or attorney-in-fact, to act on the principal’s behalf in real estate transactions. This authorization enables property sales, purchases, or management when the principal cannot be physically present or handle matters personally.

Real estate powers of attorney are essential for property owners who travel frequently, live overseas, face health limitations, or manage multiple properties across different locations. Military personnel, elderly property owners, and international investors commonly use POA documents for real estate transactions.

Types of real estate power of attorney:

General power of attorney

This grants broad authority over financial and property matters. The agent can buy, sell, lease, mortgage, or manage real estate on the principal’s behalf.

Limited or special power of attorney

This restricts authority to specific transactions, such as signing closing documents for a single property sale.

Durable power of attorney

This remains valid even if the principal becomes incapacitated. Without durability provisions, POA typically terminates if the principal becomes mentally incompetent.

Key POA components:

1. Principal and agent identification: Complete legal names and addresses of both parties
2. Scope of authority: Specific powers granted, whether general or limited to certain transactions
3. Property description: Detailed legal description of properties covered by the POA
4. Duration and termination: Effective dates and conditions that end the authority
5. Durability provisions: Whether the authority continues during the principal’s incapacity

When to use a power of attorney

Property owners closing sales while traveling abroad need POA documents for agents to sign closing papers. Military personnel deployed overseas use POA for spouses or family members to handle property transactions. Elderly property owners grant a POA to children or trusted advisors for ongoing property management. Contract signing through power of attorney requires proper execution formalities to ensure legal validity.

Key elements of real estate contracts

Understanding the essential components that make property contracts legally enforceable helps you identify problems before they create disputes. These fundamental elements apply across all types of real estate contracts.

6 Required elements for enforceability

1. Parties’ identification requires full legal names, current addresses, and signatures from all parties involved in the transaction. Proper identification prevents confusion about who holds rights and obligations under the contract.
   
2. Property description goes beyond street addresses. Legally sufficient descriptions include complete legal descriptions from deeds, parcel identification numbers, boundary descriptions, and any easements or restrictions affecting the property. Ambiguous property descriptions can invalidate contracts.
   
3. Consideration means something of value must be exchanged. In purchase agreements, consideration is the purchase price. In leases, it’s the monthly rent. In option contracts, it’s the option fee. Without consideration, agreements lack the essential element that makes contracts legally binding.
   
4. Terms and conditions establish clear obligations, rights, and responsibilities for each party. Well-drafted contracts leave no ambiguity about who does what, when actions must occur, and what happens if obligations aren’t met.
   
5. Signatures and dates from all parties demonstrate mutual agreement and establish the timeline for performance. Electronic signatures are generally valid for real estate contracts, though some states require traditional signatures for specific documents.
   
6. Mutual consent requires all parties to agree voluntarily without duress, fraud, or misrepresentation. Contracts signed under pressure or based on false information may be voidable.

This blueprint analogy captures why every contract component matters, as each element builds the legal structure supporting the entire transaction.

Additional critical components

Contingencies and special provisions

These protect buyers and sellers by making agreements conditional on specific events:

1. Financing contingency allows buyers to cancel if they cannot secure mortgage approval
2. Inspection contingency permits buyers to request repairs or cancel based on the property’s condition
3. Appraisal contingency protects buyers if the property doesn’t appraise at the purchase price
4. The sale of the current home contingency gives buyers time to sell their existing property
5. Title contingency requires sellers to deliver a clear, marketable title free of liens

Deadlines and timelines

These create accountability by specifying exact dates for inspections, financing approval, seller repairs, and closing. Missing deadlines can jeopardize transactions or trigger penalties.

Default and remedies

These clauses explain consequences if a party breaches the contract, available remedies, including specific performance or monetary damages, and dispute resolution procedures, such as mediation or arbitration.

Disclosures

These inform buyers about material property conditions. Required disclosures vary by state but typically include property defects, environmental hazards, like lead paint or radon, homeowners’ association rules and fees, and past insurance claims or property damage.

State-specific requirements

Real estate contracts are governed by state law, creating variations in required terms, disclosure obligations, and formalities. Some states mandate specific contract language or addenda. Attorney involvement requirements differ, with some states requiring attorney review while others don’t. Recording requirements for certain contract types vary by jurisdiction. Consulting local real estate attorneys ensures contract compliance with state regulations.

Commercial versus residential contract differences

Commercial real estate contracts typically involve more negotiable terms, longer and more complex due diligence periods, sophisticated financing arrangements, and detailed operational provisions. Residential contracts use more standardized forms, include stronger consumer protections, follow shorter transaction timelines, and have simpler financing terms.

How proper contract management prevents disputes

Centralized contract storage ensures all parties can quickly access current versions and eliminate confusion over which terms apply. Tracking key dates and deadlines prevents missed contingency periods and closing postponements. Version control documents show the negotiation history and demonstrate how parties reached final terms.

Obligation tracking ensures compliance with all contractual responsibilities throughout the agreement period. Quick reference during disputes allows parties to immediately cite exact contract language rather than relying on memory. Effective systems for organizing contracts prevent these common problems and streamline property transactions.

Streamline real estate contract management with HyperStart

Property professionals deal with seven distinct types of real estate contracts across the property lifecycle, from purchase agreements and leases to listing agreements, assignment contracts, option contracts, and power of attorney documents. Proper real estate contracts, explained clearly, protect all parties and establish enforceable terms.

Managing dozens or hundreds of contracts across multiple properties creates challenges. Manual tracking leads to missed renewals, lost opportunities, and compliance gaps.

HyperStart’s AI-powered contract management software centralizes all contract types in one searchable platform. Automated alerts notify you of critical deadlines, real-time visibility tracks contract status and obligations, and instant search finds any agreement in seconds.

See how HyperStart transforms real estate contract management. Book a demo