Whether you’re buying property, a business, or a car, use a purchase agreement to outline all the terms and conditions for both parties clearly.
Learn more about purchase agreements below and download a template to write yours today.
Purchase Agreements By Type
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. These 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.
Note that as a buyer, you can’t use this document to prove ownership — you’ll need a bill of sale to officially transfer ownership of the item from the seller to the buyer.
Purchase Agreement vs. Bill of Sale
A purchase agreement is signed before any property or money is exchanged — 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 equipments
- Motor vehicles
Either the buyer or the seller can prepare the purchase agreement; ensure both parties are happy with the terms and conditions of the contract. Suppose further terms are negotiated that are not included in the original agreement.
In that case, you can use a purchase agreement addendum or a real estate purchase agreement addendum (if purchasing or selling property).
What Should a Purchase Agreement Include?
There are some essential 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.
Purchase Agreement Sample
Below, you can see a purchase and sale agreement sample. You can download our free blank 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 things 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 total 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?
Each installment will be paid if it’s being paid in installments, including the day of each month. 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 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.
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 purchase contract, 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 this contract, 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).
Frequently Asked Questions
Can I write my purchase agreement?
Yes, you can write your purchase agreement. As long as the document includes all the necessary information and is signed by both parties, it will be considered legally valid.
How much does it cost to produce a purchase agreement?
It costs nothing to create a purchase agreement, but buyers sometimes must pay a deposit on the item.
If the seller requires an earnest money deposit, it should be clearly stated in the purchase agreement and the other sale terms.
What is a buying agreement?
How legally binding is a purchase agreement?
A purchase agreement is as legally binding as outlined in the agreement itself.
A purchase agreement will detail what qualifies as an acceptable reason for a buyer or seller to back out of a sale. Once it is signed, the contract is legally binding.
Can a buyer back out of a purchase agreement?
A buyer can usually back out of a purchase agreement but may face penalties such as losing their deposit or paying a fine.
The purchase agreement should clearly state any consequences of backing out of the sale.
Can a seller back out of a purchase agreement?
Sometimes, sellers can back out of a purchase agreement if the agreement specifically allows it or if contingencies outlined in the contract aren’t met.
If the buyer fulfilled their end of the agreement and the contract doesn’t include a clause permitting the seller to back out, the seller could be legally required to follow through with a sale or face legal action.
What happens after you sign a purchase agreement?
Once you’ve signed a purchase agreement, you’re legally bound to the terms of the agreement, and the buyer must pay the seller the agreed-upon amount by the date listed in the agreement the seller must hand over the property.
The parties should use a bill of sale (or a deed if selling real property) to transfer ownership from the seller to the buyer legally.