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With interest rates falling and real estate value rising, investors continue purchasing property throughout Southern California. Whether generating revenue from residential rentals or holding buildings to sell in the future, transactions require ironclad contracts to avoid disputes. 

Many real estate investors prefer “going at it alone” or taking a do-it-yourself approach, and online listing sites can make the possibilities seem endless. Meeting a potential buyer or seller in person, however, may result in an entirely different experience than what online interactions may suggest. 

Agreements to safeguard an earnest deposit and confidentiality 

Unscrupulous individuals with less than honorable intentions posing as realtors may attempt to lure buyers to a property’s physical location. Upon arrival, interested buyers may find themselves rushed into discussing an earnest deposit or down payment to “hold” the property. 

Although such extreme circumstances are not common, creating an agreement that outlines the parties’ escrow account and deposit-release stipulations may help prevent a loss. Signing the contract and including identifying information can legally bind the parties toward a transaction. If one decides to back out, the terms of the agreement dictate the return of an earnest deposit. 

As reported by The Business Journals, a confidentiality clause may hold an individual liable for misappropriating an investor’s private information. A contract may also describe the monetary damages that a breach of trust could produce. 

Separate and customized contractual arrangements for each transaction 

The median housing price hit a new record for two years in a row in 2018 and 2019, as reported by Global Property Guide. In the Los Angeles metro region, year-over-year house sale prices surged 3.8% between 2018 and 2019. “Boilerplate” contracts may not be appropriate for accommodating the varied types of transactions occurring. 

The idea of homeownership may have diminished for some individuals in the aftermath of the Great Recession, but purchasing residential properties for income purposes still appears to account for a large number of single-family housing transactions. Creating individualized purchasing or sales agreements with ironclad terms may go a long way toward protecting the interests and confidentiality of buyers and sellers.