When you’re buying or selling a home, a real estate purchase agreement is essential. This legally binding contract outlines the terms and conditions of the sale, ensuring both parties are on the same page throughout the transaction. But what exactly does this agreement entail, and what should it include? Let’s dive into the specifics.

What Is a Real Estate Purchase Agreement?

A real estate purchase agreement is a contract between the buyer and the seller of a property. It details the terms of the sale, including the price of the home and any other negotiated elements. While the agreement is drafted to reflect the buyer’s and seller’s initial intentions, it doesn’t automatically mean that all terms are final. Both parties have the opportunity to negotiate and modify the agreement until they reach a consensus.

Once both the buyer and seller agree on the terms, they simply need to sign the document. At that point, the sale is officially under contract.

Who Prepares the Purchase Agreement?

Several parties can prepare a real estate purchase agreement. Typically, the buyer’s agent will draft the document, but if the seller is handling the sale independently, they may prepare it themselves. While real estate agents can assist in filling out standard forms, it’s highly recommended to consult with a lawyer or use a well-established template to ensure all legal aspects are covered. Real estate agents aren’t licensed to create legal documents, but they often have access to standardized contracts that can be used in the transaction.

What’s Included in a Real Estate Purchase Agreement?

While each agreement may look slightly different depending on the specifics of the deal, there are certain elements that are usually included in most real estate purchase agreements:

• Buyer and Seller Information: Full names and contact details of both parties.
• Property Details: A description of the property being sold.
• Pricing and Financing: The agreed-upon price and details on how the buyer plans to pay.
• Fixtures and Appliances: A list of items included or excluded from the sale, such as appliances and fixtures.
• Closing and Possession Dates: The agreed-upon dates for closing and when the buyer will take possession of the property.
• Earnest Money Deposit: The amount the buyer will place in escrow to show commitment to the sale.
• Disclosures: Any relevant disclosures, such as information about the property’s condition.
• Prorations: How property taxes, HOA fees, and other expenses will be divided between buyer and seller.
• Insurance Requirements: Any required insurance coverage for the property.
• Closing Costs: Details on who will be responsible for paying the closing costs, typically 3-6% of the sale price.
• Conditions for Termination: Situations under which the contract may be terminated.
• Contingencies: Specific conditions that must be met for the sale to proceed.

Common Contingencies in a Real Estate Purchase Agreement

Contingencies are conditions that must be satisfied for the sale to move forward. If any of the contingencies aren’t met, either party can back out of the deal without facing penalties. Here are some common contingencies that buyers and sellers may include in the agreement:

• Financing Contingency: The sale depends on the buyer securing financing or a mortgage, unless they are paying in cash.
• Inspection Contingency: The buyer can cancel the sale if they’re not satisfied with the results of a home inspection.
• Appraisal Contingency: The home must appraise at or above the agreed sale price for the deal to proceed.
• Home Sale Contingency: The purchase is contingent on the buyer selling their current home first.
• Title Contingency: The property’s title must be clear of liens or other issues before the sale can close.

Conclusion

A real estate purchase agreement is a crucial document that ensures both parties understand the terms of the home sale. By including key details and contingencies, both the buyer and seller can protect their interests and avoid misunderstandings. If you’re preparing to enter into a real estate transaction, it’s essential to familiarize yourself with these agreements and consult a professional to ensure everything is in order.