A Real Estate Purchase Agreement is a contract between a buyer who wants to purchase a home (or another piece of real property) and a seller who owns that property. A buyer usually proposes this form, and the seller accepts or rejects the terms.
What is a Real Estate Purchase Agreement?
A real estate purchase agreement, also called a real estate sales contract, is a written agreement between a buyer and seller outlining the terms of the sale of real property. Depending on the laws in your state, the person who writes a real estate sales contract can be the buyer or the seller.
The first step of the legal process of buying or selling a home involves creating a real estate purchase agreement. The purchase agreement outlines the terms of the sale but does not transfer the property itself — more steps come afterward to finalize a legal transfer of property.
This agreement also goes by:
- Residential Real Estate Purchase Agreement
- Contract to Purchase Real Estate
- Home Sales Contract
- Real Estate for Sale by Owner Contract
- Home Purchase Agreement
When to Use a Real Estate Purchase Agreement?
If you want to move forward with purchasing a property, a real estate purchase agreement form is required.
You should use this agreement if:
- You’re a potential buyer of real property
- You’re a potential seller of real property
- You need to define the legal rights of each party to the sale
- You need to outline respective duties before the transfer of legal title
This purchase agreement can be used for any residential property purchase or sale, as long as the construction of the home is completed before the closing date of the contract.
Pros and Cons of a Real Estate Purchase Agreement
There are plenty of good reasons to write a real estate sales contract, as well as some drawbacks to consider:
Having only basic contingencies covered can be risky. Make sure you review common real estate purchase agreement provisions and seek legal advice if you’re not sure.
Consequences of Not Using a Real Estate Purchase Agreement
If you don’t have even a basic purchase agreement, you and the other party won’t have a clear understanding of your rights, possible risks, or any financial implications of those risks. It’s also much more difficult to negotiate the scope of each party’s liability and enforce your legal rights without a legally binding contract.
A real estate purchase agreement can help prevent lost time, money, and property. The following consequences can affect both buyers and sellers who don’t take the time to create a purchase agreement:
|Consequences for seller:||Consequences for buyer:|
|Appearing in court to clarify ownership and title||Appearing in court to clarify ownership and title|
|Lawsuit to get the full purchase price||Lawsuit for possession of property or money back|
|Contingencies not met before closing||Transfer of title not clear|
|Liable for fees and breaches||Contingencies not met before closing|
|Will not be paid on time||Liable for fees and breaches|
|Penalties for improper sale||Will not receive possession on time or at all|
What to Include in a Real Estate Purchase Agreement
A simple purchase agreement for real estate identifies the following basic elements:
- Buyer and seller details: The full names and contact information of the parties to the contract
- Property details: The address of the property and a legal description of the land to accurately identify the property’s location
- Purchase price: The total price to be paid for the property, including any deposits or adjustments
- Personal property: Any items included in the sale of the property such as a refrigerator, washer and dryer, sofa, etc.
- Representations and warranties: Specific claims about the condition of the property (In a “buyer beware” state, inspections are crucial to uncovering material defects)
- Financing: Will the buyer finance the purchase through third-party financing or seller financing, or will the buyer assume the seller’s existing mortgage?
- Contingencies: Any actions or conditions that must occur for the contract to happen
- Title insurance: A form of insurance that covers loss of value in the property due to future discoveries of defects in the title
- Closing and possession dates: When will the legal transfer occur and when will the buyer be entitled to possession of the property?
- Lead-based paint disclosure: A mandatory disclosure for homes built before 1978
Real Estate Purchase Agreement Sample
Below you can find what a real estate purchase agreement typically looks like:
Real Estate Purchase Agreement
Real Estate Purchase Agreement Example
In the following example, the buyer agrees to pay 1% of the purchase price in earnest money deposit at the time the agreement is signed:
How to Write a Real Estate Purchase Agreement
Before filling in the details of your real estate purchase agreement, identify the state where you will execute the contract.
Additionally, provide the effective date of the agreement.
Step 1 – Fill Out Buyer and Seller Information
1. Seller. Write down the full name of the seller, the individual or entity who is selling the property. Indicate if the seller is an individual or entity, such as a corporation, LLC, or trust. Provide the seller’s street (physical) address.
2. Buyer. Enter the full name of the buyer, the individual or entity who is purchasing the property. Indicate if the buyer is an individual or entity, such as a corporation, LLC, or trust. Provide the buyer’s street (physical) address.
Step 2 – Describe the Property
3. Property. Fill out the street (physical) address of the property the buyer is purchasing. Include any unit or apartment number, if applicable. Enter the legal description of the property.
A legal description is a geographical description of the property, commonly identified by a government survey, metes and bounds, or lot and block. You can find the legal description in the property’s deed or through the county accessor.
Step 3 – Identify Personal Property
4. Included. Summarize what is included in the sale. The purchase includes all real estate, buildings, improvements, appurtenances, and fixtures. You have an option to include additional personal property items in the sale. If you do so, provide a list of those items.
5. Excluded. You can choose whether or not to exclude certain fixtures and items from the sale. If you do, provide a list of those items.
Step 4 – Provide the Purchase Price and Details
6. Purchase Price. Fill in the total purchase price for the property. Specify the amount in U.S. dollars.
7. Earnest Money Deposit. Write the total amount of the earnest money deposit, a deposit the buyer makes showing good faith and commitment to purchase the property. At closing, the earnest money deposit shows as a credit toward the purchase price. The earnest money deposit amount varies depending on a number of factors, but is generally 103% of the purchase price.
8. Payment Method. Enter the payment method (how the buyer will pay the seller).
Step 5 – Describe Disclosures
9. Disclosures and Defects. You can choose to specify seller disclosures, such as disclosures regarding environmental hazards, flooding or drainage issues, etc.
Step 6 – Write Assumption of Loan Details
10. Assumption of Loan. State whether or not the buyer will take over the seller’s mortgage. If yes, provide the following mortgage details:
- Name of financial institution
- Date of mortgage and current balance
Also, choose whether the seller or buyer will pay the fees related to the mortgage transfer.
Step 7 – Identify Financing Contingencies
11. Terms of Mortgage. Choose what you want the terms of the mortgage to be.
12. Buyer’s Obligations. Write whether you want the agreement to be contingent upon an appraisal with a value equaling or exceeding the purchase price.
Step 8 – Enter Sale Contingencies
13. Sale of Another Property. State whether the agreement is contingent upon the buyer first selling a property, also referred to as a home contingency. If yes, provide the street address of the buyer’s property that must be sold.
Step 9 – Fill in Representations and Warranties
14. Standard Seller Representations and Warranties. The purchase agreement provides for these standard seller’s representations and warranties regarding title, authority to sell, and the property not being in violation of governmental rules, codes, permits, and regulations.
15. Additional Seller Representations. You can choose to add any additional seller’s representations and warranties listed on a purchase agreement and add your own.
Step 10 – Provide Inspection Details
16. Inspection Contingency. The agreement provides that the purchase is contingent upon the buyer’s inspection of the property. The buyer can request the seller fix or repair any unsatisfactory conditions. You can choose whether or not to include a date by which the buyer and seller must agree on repairs.
Step 11 – Write Down Title Insurance Details
17. Title Insurance Policy. This section pertains to a title insurance policy. You choose who pays for the title insurance, who selects the insurance company, and whether or not you want to include any allowable exclusions or exceptions to the policy.
18. Dates for Objections. Provide the number of days the buyer has to notify the seller of any objections to the title after receiving the preliminary title report. Enter the number of days the seller has to correct or address the objections after receiving the buyer’s notice.
Step 12 – Enter Closing Details and Deliverables
19. Closing Date and Location. Provide the date and location (street address) of the transaction’s closing.
20. Seller Deliverables. The purchase agreement provides for some standard seller closing deliverables. You can choose to add any additional seller closing deliverables on a purchase agreement form or identify your own.
21. Buyer Closing Deliverables. The purchase agreement provides for some standard buyer closing deliverables. You can choose to add any additional buyer closing deliverables of your own.
22. Seller Closing Costs. Choose the closing costs the seller is responsible for.
23. Buyer Closing Costs. Identify the closing costs the buyer is responsible for.
24. Delayed Closing. Decide whether or not to allow the buyer to delay closing due to the buyer’s lender requiring additional documentation or information. If yes, provide the number of days the buyer can extend the closing.
Step 13 – Write Down Property Possession Date
25. Possession of Property. Provide the date the seller must deliver possession of the property.
Step 14 – Identify Assumption of Leases
26. Lease Information. Write whether or not the seller is currently leasing the property. If yes, provide the name and date of the lease agreement as well as the name of the lessee.
Step 15 – Fill in Governing Law, Disputes, and Miscellaneous Information
27. Governing Law. Choose the state’s laws that will govern the construction of the purchase agreement.
28. Disputes. In the event there are disputes, choose whether buyer and seller will resolve disputes through court litigation, binding arbitration, mediation, or mediation then arbitration.
Miscellaneous. You can include additional provisions to the purchase agreement.
Step 15 – Fill in Lead-Based Paint Disclosures
29. Seller’s Disclosure. If the property was built before 1978, the seller must disclose the presence of known lead-based paint or lead-based paint hazards present in the property. The seller must also provide any available records and reports pertaining to lead-based paint and lead-based paint hazards.
30. Buyer’s Acknowledgement. The buyer must initial and sign the Lead Disclosure/Warning Statement, acknowledging the buyer received copies of all information relating to lead-based paint and lead-based paint hazards. The buyer also has to acknowledge receiving a pamphlet titled “Protect Your Family from Lead in Your Home.”
31. Agent’s Acknowledgement. If an agent is involved in the transaction, the agent must initial and sign the Lead Disclosure/Warning Statement, acknowledging the agent informed the seller of the seller’s obligations under 42 U.S.C. §4852d.
Tips for Writing a Real Estate Purchase Agreement
If you are wondering how to write a real estate purchase contract, follow these useful tips:
Include all clauses
Include all available clauses in the template, even if you think you may not need them. Attorneys have crafted these templates to minimize risks and protect the buyer and seller from a potential dispute.
Buyer beware, also known as “caveat emptor,” is especially important when the real property laws in your state do not require the seller to disclose material defects in the real property. In a sense, the buyer is purchasing the property on an “as-is” basis.
This does not mean you should take your chances, though. Especially in real estate for sale by owner, pay particular attention to inspections.
Ask yourself the following questions when reviewing your purchase agreement:
- Exactly what types of inspections do I need to perform?
- Is the purchase contingent upon inspection?
- Is there a right to terminate the sale if the seller does not perform specific fixes?
- If inspectors find unsatisfactory conditions, is there a date in the contract to resolve them?
Thorough inspections are always important, but they will be critical in the following buyer beware states:
- New Hampshire
- New Jersey
- West Virginia
If you are unsure how to write the document on your own, our template and document builder will help you create your real estate purchase contract step-by-step.
Purchase Agreement Frequently Asked Questions (FAQs)
How to Send a Real Estate Purchase Agreement
When signing a contract to purchase real estate, the format should be professional and include all the necessary information to move the purchase forward. It should clearly outline the parties involved, the property to be purchased, and contingencies related to the sale.
How Much Does it Cost to Create a Contract for the Purchase of Real Estate?
It typically does not cost anything to write your real estate purchase agreement. However, you may want to use our document builder to create your form and ensure you include all essential details for your purchase.
You can also create your entire real estate purchase agreement online using our step-by-step document builder. Download, print, and sign.
Where to Get a Real Estate Purchase Agreement Form
Real estate purchase agreements are typically drafted based on the requirements of the individual sale, so there’s no set document. You can write it yourself using our template as a guide, or use our document builder to create a customized real estate purchase agreement.