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Real Estate Purchase Agreement

Real Estate Purchase Agreement Template

Utilize our Real Estate Purchase Agreement to delineate a proposal for purchasing real estate and define the terms of the sale.

A Real Estate Purchase Agreement (REPA) is the cornerstone of a property transaction, serving as the legal bridge between a buyer and a seller. Also known as a real estate sales contract, this document outlines the intricacies of the property sale and is pivotal in safeguarding the interests of both parties involved.

Table of Contents

Understanding the Real Estate Purchase Agreement

In essence, a Real Estate Purchase Agreement is a written contract that stipulates the terms of the real property sale. It can be initiated by either the buyer or the seller, depending on the legal regulations in your state. This foundational document kicks off the legal process of buying or selling a property, setting the stage for subsequent steps in the transfer of ownership.

Key Terms:
  • Buyer and Seller Details: Full names and contact information of the involved parties.
  • Property Details: Address and legal description to precisely identify the property.
  • Purchase Price: Total cost, including deposits, down payments, and adjustments.
  • Personal Property: Items included in the sale, such as appliances or furniture.
  • Representations and Warranties: Statements regarding the property's condition.
  • Financing: Specify whether the purchase will be financed through third parties or seller funding.
  • Contingencies: Conditions that must be met for the contract to proceed.
  • Title Insurance: Coverage for potential title defects.
  • Closing and Possession Dates: Timing of the legal transfer and buyer’s entitlement.
  • Lead-based Paint Disclosure: Mandatory for homes built before 1978.
  • Escrow Agent or Company: Designate preferred escrow agents.
  • Contract Expiration: Specify the response time for the offer.

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:

sample real estate purchase agreement template

Contingencies in a Real Estate Purchase Agreement

Contingencies are critical elements that could impact the sale. Common contingencies include:

1. Home Inspection:
  • Allows for inspection and the option to terminate based on specific issues.
  • Buyers may request repairs or opt-out if problems arise.
  • Seller awareness of existing issues revealed during inspection.
2. Mortgage:
  • Void the agreement if the buyer can't secure a home loan.
  • Protects earnest money if financing falls through.
  • Common due to potential issues during underwriting.
3. Title:
  • Allows termination if title issues can't be resolved before closing.
  • Buyer's right to run a title search for liens or claims.
  • Option to include title insurance based on search results.
4. Appraisal:
  • Permits an appraisal to ensure property value aligns with the purchase price.
  • Can be used to negotiate a lower price.
  • Important in a competitive market.
5. Homeowner’s Insurance:
  • Requires buyer to secure insurance before closing.
  • Addresses potential issues affecting financing.

Purchase Agreement Addendums

Addendums are additional terms not found elsewhere. They can include:

  • Receipt for Earnest Money Paid
  • Homeowners Association (HOA) Details
  • Additional Property Included
  • Extension on Closing Date
  • Seller Financing Details
  • Termination Option
  • Contingency for Buyer’s Home Sale
  • Clause for Increasing Buyer’s Offer

Real Estate Purchase Agreement Disclosures

Disclosures provide crucial information about potential property issues, ranging from structural concerns to environmental hazards. State and federal laws often mandate disclosures to ensure buyers are well-informed about the property's condition.

Example Disclosures:
  • Foundation or structural issues
  • Roof problems
  • Past damage and repairs
  • Water and sewer systems
  • Plumbing, electrical, heating, and air conditioning
  • Mold problems
  • Environmental hazards
  • Lead paint disclosure
  • Sexual offender notice
  • Boundary disputes

When to Use a Real Estate Purchase Agreement?

This comprehensive agreement is suitable for any residential property transaction, be it a house, condominium, townhouse, or other real estate structures. Use it when:

  • You're a potential buyer or seller of real property.
  • You need to define legal rights and responsibilities.
  • Outline respective duties before the transfer of legal title.

Pros and Cons of a Real Estate Purchase Agreement

Pros:
  • Demonstrates commitment to closing the sale.
  • Meets legal requirements for a written contract.
  • Defines rights, responsibilities, and contingencies.
Cons:
  • May lack coverage for obscure legal clauses.
  • Might not suit the preferences of all parties.
  • Covers only basic contingencies, posing some risks.

Consequences of Not Using a Real Estate Purchase Agreement

Failing to have a comprehensive purchase agreement can lead to various challenges:

  • Unclear understanding of rights, risks, and financial implications.
  • Difficulty negotiating liabilities and enforcing legal rights.
  • Increased risk of lost time, money, and property.
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

How to Write a Real Estate Purchase Agreement

Tips for Writing a Real Estate Purchase Agreement

If you are wondering how to write a real estate purchase contract, follow these valuable 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

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 purchases the property on an “as-is” basis.

This does not mean you should take your chances, though. Especially in real estate for sale by the 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 necessary, but they will be critical in the following buyer beware states:

  • Alabama
  • Arkansas
  • Colorado
  • Florida
  • Indiana
  • Massachusetts
  • Missouri
  • Montana
  • New Hampshire
  • New Jersey
  • Virginia
  • West Virginia
  • Wyoming

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.

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 the Buyer and Seller Information

1. Seller. Write down the seller’s full name and the individual or entity 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 buyer’s full name and the property’s owner or entity. Indicate if the buyer is an individual or entity, such as a corporation, LLC, or trust. Provide the buyer’s street (physical) address.

buyer and seller information

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, bounds, or lot and block. You can find the legal description in the property’s deed or through the county accessor.

property information

Step 3 – Identify Personal Property

4. Included. Summarize what is included in the sale. The purchase consists of all real estate, buildings, improvements, appurtenances, and fixtures. You have the 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.

personal property information

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 (also called a good faith 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 several factors but is generally 103% of the purchase price.

8. Payment Method. Enter the payment method (how the buyer will pay the seller).

purchase price

Step 5 – Describe Disclosures

9. Disclosures and Defects. You can specify seller disclosures, such as environmental hazards, flooding or drainage issues, etc.

disclosures

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.

assumption of loan

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 contingent upon an appraisal with a value equaling or exceeding the purchase price.

financing contingencies

Step 8 – Enter Sale Contingencies

13. Sale of Another Property. State whether the agreement is contingent upon the buyer first selling a property, also called a home contingency. If yes, provide the street address of the buyer’s property that must be sold.

sale contingencies

Step 9 – Fill in Representations and Warranties

14. Standard Seller Representations and Warranties. The purchase agreement provides for these standard sellers’ representations and warranties regarding title, authority to sell, and the property not violating governmental rules, codes, permits, and regulations.

15. Additional Seller Representations. You can add any additional seller’s representations and warranties listed on a purchase agreement and add your own.

real estate purchase agreement seller representation warranties

Step 10 – Provide Inspection Details

16. Inspection Contingency. The agreement provides that the purchase is contingent upon the buyer’s inspection. 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.

property inspection

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 days the buyer has to notify the seller of any objections to the title after receiving the preliminary report. Enter the days the seller has to correct or address the complaints after receiving the buyer’s notice.

real estate purchase agreement title insurance

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. 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 days the buyer can extend the closing.

real estate purchase agreement closing deliverables

Step 13 – Write Down the Property Possession Date

25. Possession of Property. Provide the date the seller must deliver possession of the property.

possession of 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.

assumption of leases

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. If there are disputes, choose whether the buyer and seller will resolve disputes through court litigation, binding arbitration, mediation, or mediation then arbitration.

governing law and disputes

Miscellaneous. You can include additional provisions to the purchase agreement.

Miscellaneous

Step 16 – 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 records and reports about lead-based paint and lead-based paint hazards.

30. Buyer’s Acknowledgement. The buyer must initial and sign the Lead Disclosure/Warning Statement, acknowledging that the buyer received copies of all information about lead-based paint and lead-based paint hazards. The buyer must also acknowledge receiving a pamphlet titled “Protect Your Family from Lead in Your Home.”

31. Agent’s Acknowledgement. Suppose an agent is involved in the transaction. In that case, the agent must initial and sign the Lead Disclosure/Warning Statement, acknowledging the agent informed the seller of the seller’s obligations under 42 USC §4852d.

real estate purchase agreement lead based paint disclosures

By understanding the nuances of a Real Estate Purchase Agreement and incorporating key elements like contingencies and disclosures, both buyers and sellers can navigate property transactions with confidence. Take the time to review standard provisions and, when in doubt, seek legal advice to ensure your interests are protected throughout the real estate journey.

Frequently Asked Questions

When should a Real Estate Purchase Agreement be used?

A Real Estate Purchase Agreement is appropriate when buying or selling any residential property, including houses, condominiums, townhouses, or other real estate structures. It is used to define legal rights, outline duties, and facilitate the transfer of legal title.

Who initiates the creation of a Real Estate Purchase Agreement?

Depending on the laws of the state, either the buyer or the seller can propose and draft the Real Estate Purchase Agreement to initiate negotiations for a property transaction.

Real Estate Purchase Agreement Sample

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