Real estate purchase agreements are governed by contract law. These agreements must therefore:

• Be in writing.
• Be marketable (free of encumbrances, liens, or other title defects).

All property purchase agreements need to be in writing or they are not enforceable. All binding agreements follow a simple formula of Offer Plus Consideration and Acceptance equals Contract. For example, "I will buy your farm today" is not a valid contract. Nor is "I will buy your farm for $10,000 some day". Everyone gets stuck on the price, the CSR, and FSA maps to create an offer. What if often missed are fine details, like allocating the purchase price between buildings, dwellings, well, tile, fences and improvements and dates of possession.

From the buyers stand point, a portion of the purchase price should be allocated to the residence (which cannot be depreciated), buildings , fences and wells (which are depreciable to the buyer) and then a portion to the bare ground. From the seller's stand point, they want as much allocated the residence as possible. This is because the seller receives favorable treatment as a capital gain and the excluded from gain tax at all in some case.) The seller wants no more assigned to the buildings, fences, tile and well than they have remaining on the depreciation schedule, as the excess assigned to those items will be treated as ordinary income which is not as favorable as capital gain.

Capital gain tax is generally lower than ordinary income tax rates. Step up in basis is a concept that allows a person who receives property from an estate to only pay capital gains tax on the difference between date of death value and the date of sale.  If the property is gifted to the person, the cost that the gift giver paid for the property transfers to the new person as well. Consider the difference in capital gains tax between a  farm bought in 1950 for $300 an acre and given to the next generation during the owner's life time. If the next generation turned around to sell it at market price in 2011 of $10,000 per acre, capital gains would be paid on $9,700 per acre. Conversely, if the next generation inherited the property in 2011, and sold it for $12,000 an acre in 2014, only 2,000 per acre would be subject to capital gain tax.

The IRS allows you to delay paying capital gains taxes on a sale by conducting a "like kind" exchange. This is a process where you give up one piece of property and aquire another. The basis from your old property is transferred to the new property and you delay paying capital gains tax until you sell the new property. The frequent concept is to exchange into another property and then hold that until death to receive a step up in basis.

The story of the property is contained in the abstract. The abstract is updated with entries of everything impacting the property and the people that own it (such as liens, lawsuits, divorces, deaths, marriages, judgments). A title opinion is like a book report on that story that a lender uses to determine if they should lend money to the purchaser.

Real estate buyers generally employ an attorney to review the abstract after the abstract is updated. This process, called a title search, involves examination of the public records.

The title searcher will go through the county's public records and assemble a chain of title by finding all recorded deeds for the property in question. He or she will also look for encumbrances on the property. Encumbrances include but are not limited to:

• Mortgages.
• Unpaid taxes.
• Legal judgments.
• Municipal improvement liens.
• Government claims.
• Foreclosures.
• Easements.
• Covenants.
• Condemnations

In a marriage, it takes one person to buy property, but two to sell. Even if the spouse's name is not on the deed, they must sign the deed to transfer the property. This signature is required to remove "dower rights" which is a hold over concept from when Iowa didn't let women own property but didn't want the husband transferring property to the newer, younger mistress and leaving the spouse and children on the public assistance rolls.

Property in Iowa can be held as Joint tenants with rights of survivorship (JRTWS) or as tenants in common (TIC). The difference determines whether you file an affidavit (Joint tenants) when the co owner dies and you take the whole property, or if the co owners will controls (tenants in common). Depending on who you own property with, this distinction is critical. It determines if a probate estate needs to be opened at the first to die or if a simple affidavit will transfer title.

Also floating around in real estate records are life estates.  For many years, a life estate to the surviving spouse with a remainder interest to the children was a cheap effective way to pass real estate without a lot of complex will drafting. Further, it ensured that a second spouse and that spouse's children didn't "get their hands on" family assets, usually farm ground. The elder generation essentially got to behave as if the ground was still entirely theirs (rent collected, taxes paid, military and homestead exemptions applied) until their death.

Property is like a bundle of sticks. Each aspect of property (right to use, responsibility to pay taxes, mineral rights, wind farm rights) is one of the sticks in the bundle. Under a life estate, one person holds onto the right to occupy and use the property along with the responsibility to pay the taxes (the Life estate holder). Another person(s) (remainderman) hold the rest and when the first person dies, those "sticks" transfer to the second person(s).

However, court rulings have made life estates less appealing.  First, while the transfer occurs upon the life estate holder's death, the remainderman cannot take those sticks without clearing a Medicaid lien on the property. The value of the life estate holder's interest is figured just prior to his death. This can mean that despite transfer of substantial interest in the farm prior to death, a life estate holder on title 19 can be made to pay back part of moneys advanced for their care in a long term care facility.

Second, the tax basis for a life estate property is established at the time of transfer, not at death. If it was not a sale with a retained life estate, then the remaindermen get the transferor's presumably low basis in the property, not the higher "stepped up" basis that they would have received had the property been transferred via probate proceedings.

It gets even more tangled and snarled when folks retain a life estate to their spouse, then a life estate to their children and make the grand children the remaindermen. This can run afoul of federal gift tax law because the gift to the grandchildren is a gift of a future interest, and no gift tax exclusion is available for such a gift.

The remainderman can prevent logging on the property and tearing down of buildings if they are good quality to prevent "waste", but even then that is sometimes a litigation battle. The life estate may still have some applicability, but its use as a quick and easy way to avoid planning should be fading.

Easements

Sometimes property acquires rights over other properties. These can be given freely or taken from the other property. These rights are called easements. Easements are just another stick in the bundle of sticks that make up property.

If you cross your neighbor's pasture long enough you may acquire a right to travel across it via a proscriptive easement if the neighbor didn't give permission or a permissive easement if he did.  Easements can be for travel, access, drainage, noise, smell or any manner of things. Easements need not be recorded, but it is a great idea to do so. A good easement has the descriptions of both the properties involved and is written with an eye towards preventing future problems, which leads to more attorney's fees.

For example, an easement to allow "access to the pasture" is vague, does it mean access to drive cattle across the parcel, what about farm equipment when the pasture is torn up. Consider that an easement that is 15 feet wide was probably great in 1948 but now is probably unduly small to get implements through it. The easement should address who has to maintain the property and how costs get shared.