Purchase agreements for real estate are contracts between both the seller and buyer that deal with the purchase of a household or other property. The buyer usually makes the offer, which is subject to acceptance by the seller.
The residential real estate purchase agreement is a binding contract between a buyer and a seller that transfers the ownership of real estate in exchange for a sales price. The agreement outlines the terms and conditions both parties must follow until the closing date, unless amended.
To move forward with a real estate purchase, it is necessary to create a real estate business contract. Although the purchase agreement outlines the terms of the sale, it does not transfer the property. There is still work to be done to finalize a transfer with legal documents.
A real estate purchase agreement form is necessary to move forward with the purchase of a property.
Use this agreement if:
Any residential property purchase or sale may be executed using this sales and purchase agreement, as long as the home’s construction is complete before the contract’s expiration date.
Without a basic purchase agreement, you and the other party will not have an understanding of your rights, the risks, or the costs associated with those risks. The scope of each party’s liability is also more difficult to negotiate and your legal rights are more difficult to enforce without a legally binding contract.
You can prevent lost time, money, and intellectual property when you use a real estate purchase agreement. When buyers and sellers fail to create a purchase agreement, the following consequences can occur:
You don’t have to pay anything to create a real estate purchase agreement. Download one of our templates or follow our detailed guide.
The real estate purchase agreement usually follows the requirements of each sale, so there isn’t a set document. We have provided a template for your convenience.
The outcome of a real estate transaction can be disastrous if a knowledgeable person doesn’t draft the contract carefully to include all the legal stipulations that apply to both buyers and sellers. The buyer may be willing to pay a favorable price for the property, but a lack of details in the purchase agreement could lead to the deal crumbling. As long as you include certain specifics about your property, you can create your own real estate purchase agreement without spending any cash.
You should start by listing the legal address and type of property you are selling. The property would list as a single-family home, for example. Be sure to include any restrictions or zoning laws that apply to the property. Be sure to give a list of any permanent fixtures and appliances that will accompany the property. As an example, if you are including the furnace, kitchen appliances, and window coverings, list them in the description.
Your real estate purchase contract should specify the home’s purchase price. In addition, you can include the amount of the down payment that will be escrowed. Indicate the escrow closing date. Before the property transfers to the buyer, the seller must leave the property. Escrow accounts typically close within a few days of the date listed on the purchase contract. Make sure you schedule your move-out accordingly.
The buyer and seller agree on a move-in date. Typically, the buyer will receive keys at closing. The closing can take place on the same day the buyer takes possession of the property.
Offer the buyer the right to inspect the property for hazardous materials or other mechanical defects that may limit the buyer’s purchase. Following the inspection, you will list who must repair the property. Indicate who will handle certain repairs. Include any home warranty plans. Real estate agents use home warranties to sell homes and ease buyers’ concerns.
Provide additional provisions and conditions. The buyer must find financing for the home within a certain time frame, for example. Include a standstill clause in the contract. Standstill means the seller won’t negotiate the sale unless the borrower fails to get financing by an agreed-upon date. Either party can also agree to repudiate the contract. If neither party meets all the basic details of the purchase agreement, the buyer and seller can walk away from the deal. Adding a non-binding clause to the purchase agreement will eventually require a binding purchase agreement that binds both buyer and seller.
Basic elements of a real estate purchase agreement include the following:
We’ve included a simple purchase agreement pdf and steps to follow, for your convenience.
Enter the following information regarding the participating parties in the first section of the form:
The date the agreement is put into effect (month, day, and last two digits of the year)
Describe the property you are selling/purchasing by entering:
Enter the proposed purchase price in the corresponding fields at the top of the section. After determining the purchase price, choose how the buyer will fund the transaction. The buyer has several options:
Those who will be purchasing the home in cash instead of using a mortgage company will have the first option. To exercise this option, simply:
Select the All Cash Offer checkbox.
Provide a date and time when the buyer must provide verification of their ability to pay the full purchase price of the property from a third party (third party).
In most cases, homebuyers get their funds from a financial institution. To indicate that the buyer needs financing, they should fill out this section.
The sale should include the following conditions:
Earnest Money Deposit: If the buyer is making an earnest money deposit, whether it is a strategic move or the seller requires it, the individual completing the form should:
Sale of Another Property: Does the buyer request that the transaction is conditional upon their ability to sell their property? If not, check the first box. If they are, check the second box and provide the following information:
Closing costs: Depending on how the arrangement was negotiated, the party responsible for covering expenses may vary. In this section, you must determine which party is responsible for the cost. You may choose one (1) of the following:
Individuals filling out the form must define the terms in the following sections:
Establish the closing date and time
Provide the following information:
When completing the Title Search Report, the party providing the information should:
The seller agrees to maintain the current condition of the home until the time of sale and the buyer has the right to hire a licensed inspector to investigate the property. Inspection conditions should be noted as follows:
Outline the following requirements for the sale:
If you want to finance the purchase of a property, most lenders will require an appraisal. Your options are:
If an appraisal is not necessary to complete the exchange, mark the box saying it will not be contingent upon the appraisal being equal to or greater than the prearranged sales price.
When selling real estate, most people will select the second option stating that the transaction is conditional upon an appraisal equal to or greater than the asking price. If an unsatisfactory appraisal does occur, indicate how many business days the parties will need to renegotiate the contract terms.
In the event a party terminates the agreement, enter how many days it will take to refund the earnest money deposit.
In this portion of the form, the user will indicate the state where the sale will take place and whose laws will govern any local real estate transactions.
Establish a date and time for the receiving party to accept the contract and sign it from the effective date. After the time limit expires, the offer is no longer valid.
Two final sections ask you to cover the following items in the agreement:
Most states for real estate sales require certain disclosures. Verify whether or not the agreement includes disclosures by:
You can add any additional terms and conditions that are not included in the content of the purchase agreement in the space provided (such as the rent-back clause in the screenshot below).
All parties must provide the following information as part of the agreement:
The purchase agreement will become binding once all the above fields are complete.
These tips will help you draft a real estate purchase contract:
Incorporate all clauses in the template, even if you don’t think you’ll need them. Using these templates, attorneys minimize risks and protect the buyer and seller from potential disputes.
“Buyer beware,” or “caveat emptor,” is especially important if your state’s real estate laws do not require disclosure of material defects. In a sense, the buyer is purchasing the property on an as-is basis.
It is imperative that as a buyer, you perform due diligence regarding inspections.
Review your purchase agreement and ask yourself these questions:
In the following buyer beware states, thorough inspections will be critical: Alabama, Arkansas, Colorado, Florida, Indiana, Massachusetts, Missouri, Montana, New Hampshire, New Jersey, Virginia, West Virginia, and Wyoming.
The affidavit of title is a legal document whose purpose is to describe the status of potential legal issues surrounding the property or its seller. An affidavit confirms that the seller of a property holds the title and owns the property. Also, it confirms that certain aspects of the property are accurate, as sworn to by the seller and duly notarized.
When a home buyer and a lender close on a property, they exchange a deed of trust. The document stipulates that the home buyer will repay the loan and that the mortgage lender will retain title to the property until the loan is fully repaid.
Mortgage deeds prove the transfer of interest to the mortgage holder and are often referred to as the mortgage.
Quitclaim deeds transfer ownership of a property from one person to another without offering much buyer protection. Grantors give their current deed to grantees, recipients of the properties. No changes or additions are made to the title.
A warranty deed is frequently used in real estate transactions to ensure the purchaser of the property has protection to the fullest extent possible. The owner guarantees that the property is free and clear of all liens, mortgages, or other encumbrances against it.
Real Estate Purchase and Sale Agreement –– FAQ
The parties to a purchase agreement for the sale of residential property legally must uphold the commitments listed in the contract once they sign it and it is in escrow. Sellers who want to back out of the agreement may do so in one of the following ways:
Often, after signing a contract, it will go through a five day review so that attorneys can check it for accuracy. The seller can terminate the agreement at any time during this process.
The seller may withdraw from the contract at any time during the contract if the purchase agreement includes an addendum that permits this. This addendum will rarely be included in a purchase agreement.
Each party typically records certain contingencies in the sales document that allow termination if they are not met before closing.
Contact the purchasing party and explain the reasons why you want to terminate the agreement if all else fails. It’s possible that a buyer will sympathize with your situation and void the contract. Ask if need be.
The seller can face legal consequences and be held liable for compensation if they can’t lawfully withdraw from the contract and refuse to continue with the sale.
It’s possible to terminate a purchase agreement. You give the seller an earnest money deposit when you sign a purchase agreement for real estate, and you are legally bound to the terms of the contract. The earnest money shows the seller that you intend to follow through and purchase the house. In most cases, however, contingencies allow you to back out of a legally accepted offer while still getting your earnest money back.
Taking a home off the market if a buyer isn’t committed is not fair to the seller. An escrow account will hold the earnest money details, which will help to cover some of the buyer’s closing costs at settlement.
The severity of the consequences, however, depends on the contingencies in your proposal describing when backing out without penalty is acceptable.
Before signing the purchase agreement, it is easier to back out of buying a house outside of home sale contingency periods. You’ll be in much more trouble if you leave after that point or after the financing contingency periods have expired.
Home purchase agreements in some states include a clause requiring both parties to agree to mediation if there is a dispute. With the help of a mediator, you can directly discuss the issue with the seller and, hopefully, resolve it without the need for a courtroom trial.
The buyer. As stated in the contract, a purchase agreement for the house is legally binding. Buyers should be allowed to back out of a purchase agreement for acceptable reasons. If you break the contract once it’s signed, you could lose your earnest money deposit.
There are several reasons why a seller can back out of a contract, including problems arising from contingencies in the contract.
Once you have accepted an offer to purchase, you will have a period of between 10 and 14 days during which you must sign a purchase & sale agreement. As soon as the home inspection and any supplemental inspections are complete, the purchase & sale agreement can be negotiated. At this point in the sale process, your attorney will be an invaluable resource. You may want to negotiate the price down if the home inspection reveals moderate to major work that needs to be done.