What is a real estate purchase agreement?
If you’ve ever made a major purchase, such as buying real estate, you might have had to sign a purchase agreement.
They’re crucial to protect both parties in a transaction where there’s a lot at stake.
These might be corporate mergers or acquisitions, or even just a large order of certain supplies.
It’s important to understand how these purchase agreements work going into a big transaction, but the thought of drafting the terms and conditions yourself can be overwhelming.
Luckily, you don’t have to.
Real estate contract templates can make your purchase agreements a non-issue.
With PandaDoc’s suite of document automation tools, you can make drafting, editing, and signing a breeze.
But what is a real estate purchase agreement, precisely, and how do such agreements work? Let’s find out.
What is a purchase agreement?
A purchase agreement is a legal document outlining the terms and conditions of a sale.
It’s typically used for large or complex acquisitions, like real estate deals or corporate mergers.
The agreement details information such as the parties involved, the price, payment terms, warranties, and any other conditions that must be met for the sale to be completed.
What is a real estate purchase agreement?
A real estate purchase agreement, sometimes also known as a property purchase agreement, is a binding contract that’s signed by both the buyer and seller.
It typically includes details such as the purchase price, deposit amount, and closing date.
Note that the purchase agreement doesn’t transfer the title of the property from the seller to the buyer.
The goal of the agreement is simply to ensure that this long, complex, and costly transaction ends in a way that’s satisfactory to both parties.
You might be wondering, “does a real estate purchase agreement need to be notarized?”
After all, it is a legal document.
The answer is “no”. As they’re not filed with county records, you can sign and send them online without any issues.
Why is a purchase agreement for property important?
A purchase agreement is a crucial document in property transactions as it ensures that the buyer and seller are both aware of and agree to the terms of the sale.
The agreement also sets down liabilities and dispute resolution paths if either party fails to fulfill their end of the bargain.
If circumstances change, both parties can work together to revise the agreement.
If a lot of money is on the line, a purchase agreement is vital to ensure a smooth and successful property transaction.
What are the key terms in a real estate purchase agreement?
So, what key terms and conditions do these agreements tend to cover, and what do they mean?
Buyer and seller details
One of the functions of this agreement is that it records detailed information about the buyer and seller.
The purchase agreement may also include details about the seller’s ownership of the property, such as proof of their legal right to sell and any outstanding liens or encumbrances (e.g., a mortgage).
A critical aspect of this agreement is the terms of financing. This covers how the buyer plans to pay for the property.
If a loan is required for the purchase, such as a mortgage in the case of a residential purchase agreement, the agreement might include specific terms related to this, like the annual percentage rate (APR), the buyer’s allowed debt-to-income ratio, terms and conditions of defaulting on the loan, costs of closing, and title insurance fees.
Agreements typically include contingencies, too, which are specific conditions that must be met before the transaction is finalized.
These may cover details like inspection, appraisal, and financing.
The inspection contingency is one of the more time-consuming aspects.
Checking this box involves a walkthrough and appraisal of the property, which can affect its value.
If any of the contingencies specified aren’t met, the agreement may be terminated. In this case, one or both parties can walk away from the transaction without penalty.
A dispute resolution clause
Nobody wants a transaction to turn into a legal dispute.
They’re costly and time-consuming for everyone involved, so it’s essential that a purchase agreement sets out ways to handle any issues that may arise.
The dispute resolution clause may detail alternative dispute resolution methods, such as mediation or arbitration.
This keeps legal disputes relatively inexpensive and off the public record.
This clause will usually specify the jurisdiction and venue for any legal proceedings and outline the process for resolving disputes.
For example, giving notice of it and attempting to fix the dispute through negotiation before resorting to legal action.
Real estate purchase agreement samples
“Now I know what it covers, can I write my own real estate contract?”, we hear you ask.
You could—but even if you want a custom agreement, it’s often better to use a sample.
This will save you hours of drafting, editing, and re-editing by having someone else do the legwork for you.
Whether you’re looking for a short-term rental or a commercial lease agreement, PandaDoc has off-the-shelf samples ready to go.
Our selection of real estate contract templates come with the Is already dotted and Ts pre-crossed, so you don’t have to waste time drafting an agreement from scratch.
Check out PandaDoc’s real estate purchase agreement template
If you need a real estate purchase agreement now, there’s no faster, more secure, or more convenient solution than PandaDoc.
Start with our purchase agreement template as a reference point, customize it with your team, then send it to the other party for easy and secure signing!