Free Purchase Agreement

Whether you’re buying property, a business, or a car, use a purchase agreement to clearly outline all the terms and conditions for both parties. Learn more about purchase agreements below and download a template to write yours today.

Table of Contents

• What is a Purchase Agreement?
• When to Use a Purchase Agreement?
• Types of Purchase Agreements
• What Should a Purchase Agreement Include?
• Sample Purchase Agreement Form
• How to Write a Purchase Agreement?
• How to Send a Purchase Agreement?
• Financial Terms in a Purchase Agreement:
• Purchase Agreement FAQs/Related Questions

What is a Purchase Agreement?

A purchase agreement is a legal document between a buyer and a seller. It is a document that outlines the terms and conditions of a sale. Purchase agreements are often used for high-value items or custom orders where the buyer or seller needs assurance that both parties follow the agreed-upon terms.

A purchase agreement is typically used for more complicated transactions, where several aspects may be involved, such as payment terms or goods delivery. To be legally binding, it must be signed by both the buyer and the seller before any payment is made and goods delivered. For simpler transactions, a bill of sale or receipt may be enough.

This document can also be referred to as a:

• Purchase and Sale Agreement
• Purchase Contract

Note that the buyer can’t use a purchase agreement to prove ownership — you’ll need a bill of sale to officially transfer ownership of the item from the seller to the buyer.

What’s the Difference Between a Purchase Agreement and a Bill of Sale?

A purchase agreement is signed before any property or money is exchanged — it’s an agreement between the parties to enter into a future transaction. The purchase agreement documents the transaction details to ensure both parties understand and agree to the terms.

A bill of sale is signed during or after exchanging money and property. It documents the transfer of ownership from the seller to the buyer and acts as a transaction receipt.

When to Use a Purchase Agreement?

You should typically use a purchase agreement for more complex or high-value transactions—generally over $500. You can use a purchase and sale agreement for various transactions, such as:

• Real estate
• High volume purchases
• Used equipment
• Motor vehicles

Either the buyer or the seller can prepare the purchase agreement; just ensure both parties are happy with the terms and conditions of the agreement. If further terms are negotiated that are not included in the original agreement, then you can use a purchase agreement addendum or a real estate purchase agreement addendum (if purchasing or selling property).

Types of Purchase Agreements

What Should a Purchase Agreement Include?

There are some basic elements that every purchase and sale agreement needs to include:

• Seller and buyer names and addresses: State who the contract legally binds and their addresses.
• What is being sold: Clearly outline what is being sold, whether a business, car or real estate.
• Purchase price: Include the total purchase price the buyer will pay the seller, including any applicable sales tax.
• Payment details: Detail how payment will be made and to what schedule.
• Taxes: Include a section on taxes and who will be responsible for paying them.
• Delivery: When will the item being sold be delivered
• Governing law: What state will the agreement be governed by?
• Disputes: Include how any disputes will be handled.
• Signatures: Both parties must sign the agreement.

Sample Purchase Agreement Form

Below, you can see a typical purchase and sale agreement. This free blank purchase agreement template shows how you can outline the essential agreement details between buyer and seller. Download our purchase agreement template in Word or PDF format:

How to Write a Purchase Agreement?

Follow the below steps to write a solid purchase agreement:

Step 1 – Buyer and Seller Details

List the details of all parties involved. You must include the seller’s and buyer’s information, including their name, address, and contact details such as phone numbers or email addresses. Make it clear which person is buying and which is selling.

Step 2 – List the Item Being Sold

Describe the item that’s being sold. If multiple pieces of items are being sold at once, they can all be included here on individual lines. Make sure you clearly outline what exactly is being sold.

Step 3 – Purchase Price and Payment

Detail the complete purchase price that the buyer pays the seller. Ensure that you include any applicable sales tax and other relevant costs.

Then, outline the payment details. How will the buyer pay the seller? By what schedule will payment be made?

If it’s being paid in installments, including the day of each month, each installment will be paid. You should also outline who is responsible for any taxes.

Step 4 – Terms and Conditions

In this section, you need to cover other relevant terms and conditions. Include the seller’s representations, governing law, how disputes will be handled, and any other necessary clauses.

Step 5 – Signatures

Finally, all parties must sign to ensure that the purchase agreement is legally binding and that both have read and understood the contract.

To start creating your purchase agreement, you can use our document builder, which has tips and instructions to help you, or you can write one from scratch using our template as a guide.

How to Send a Purchase Agreement?

Traditionally, purchase agreements were sent through the mail or delivered in person, but now it’s relatively common for them to be sent and signed electronically. If you’re uncomfortable e-signing, you can sign and send the purchase agreement by certified mail and have the other party sign the printed copy.

Do I Need to Send a Purchase Agreement? What Happens If I Don’t?

If you’re buying or selling any property, it’s a good idea to document the sale with a purchase agreement. Having a written contract in place lets everyone involved consider and clarify the details of the sale. When both parties sign a completed purchase agreement, they confirm they understand how the transaction will occur.

Purchase agreements also legally bind each party to follow through with the terms of the sale. If a buyer and seller verbally agree to a sale but don’t use a purchase agreement, there will be no clear course of action in a dispute (such as if the item isn’t in the condition the buyer expected or if one party backs out at the last minute).

Financial Terms in a Purchase Agreement:

• Earnest money: A sum of money put forward by the seller to show they are serious about the purchase.
• Closing costs: Expenses incurred over and above the purchase price that occurs when completing the purchase, typically in a real estate transaction.
• Down payment: A payment made in the early stages of purchasing an expensive good or service is a portion of the total purchase price.
• Financial contingency: Also known as a mortgage contingency (in a real estate purchase), the clause allows the buyer to cancel the purchase agreement without penalty if they cannot secure the required finances. The buyer will also receive a refund of their earnest money deposit.
• Escrow: An agreement that a third party receives and distributes the money or property once conditions have been met.
• Proration: Credits between a buyer and seller at closing. They ensure that each party only pays these costs when they own the property. Each party’s closing statement will display them as credits or debits.

Purchase Agreement FAQs/Related Questions