Real Estate Purchase Agreement Templates by PandaDoc

Key Takeaways

A real estate purchase agreement is a legally binding document that outlines the terms and responsibilities of both parties involved in the property sale, known by various names like real estate contract or home purchase agreement.
It must include essential components such as the property description, purchase price, earnest money amount, closing date, and any contingencies or conditions agreed upon by the buyer and seller.
State laws dictate the content of real estate purchase agreements, emphasizing the need to verify local regulations before signing and include common state-required disclosures.

Using a state-specific template for a Real Estate Purchase Agreement is crucial because it ensures legal compliance with the specific regulations and nuances of the state.

What is a Real Estate Purchase Agreement?

A real estate purchase agreement is a legally binding document that governs the terms and conditions of the sale of a property. This document sets out the responsibilities of each party as they relate to the purchase of real estate. This document is sometimes called a real estate contract, home purchase agreement, house purchase agreement, or a real estate purchase contract.

Real Estate Purchase Agreements by State

Real estate laws can vary significantly from one state to another. Some states have specific requirements and disclosures that must be included in a real estate purchase agreement.

Create your real estate purchase agreement using our state-specific templates to ensure legal compliance with your local regulations and nuances of the state.

Legal Requirements

State laws will typically govern what needs to appear on the purchase agreements. As such, it’s vital that you check your local regulations before signing a real estate purchase agreement. Some common disclosures that your state may require include:

Contingencies

These are specific conditions that must be met before the agreement is considered enforceable by a court of law. These can include inspections, appraisals, financing, and other title contingencies.

Earnest money deposit amounts

This is considered a good faith deposit demonstrating the buyer’s ability and desire to purchase the property. This is usually deposited into an escrow account until the mortgage note closes.

Some states may have different rules on how earnest money is handled and refunded.

State	Earnest Money Deposit Regulations	Custodian
California	No specific limit. Typically held by a neutral third party.	Escrow or title company
Florida	No statutory limit. Often held in escrow.	Title company
Texas	No state-mandated limit. Customarily held in escrow.	Title company or escrow agent
New York	No statutory limit. Customarily held in escrow.	Seller’s attorney or real estate broker
Pennsylvania	No specific state limit. Often held in escrow.	Title company or seller’s broker
Illinois	No statutory limit. Frequently held in escrow.	Title company or attorney
Ohio	No statewide limit. Typically held in escrow.	Title company or attorney
New Jersey	No set limit in state law. Commonly held in escrow.	Title company or attorney
Tennessee	No statutory limit. Typically held in escrow.	Neutral third party
Wisconsin	No state-mandated limit. Usually held in escrow.	Title company or real estate broker

Requirement for notarization

The requirement for notarization of real estate purchase agreements can vary, and it’s essential to consult specific state laws.

Generally, states such as California, Florida, and New York may require notarization for certain real estate documents, but this can depend on the specific circumstances and the terms of the agreement.

Other

Aside from the contract being signed and dated by all parties involved, a number of requirements must appear on all contracts before they’re considered legally valid. These requirements include:

There must be a valid offer and acceptance: If any changes are made to the offer, this construes a counteroffer and not acceptance. Both parties must accept an offer or counter offer before it’s considered valid.
There must be fair consideration: Each party must provide something of value to the agreement. This can be agreeing to pay a fair price based on the property’s value.
The agreement must be entered into voluntarily: There must be no signs of coercion, influence, fraud, or misrepresentation.
All parties must possess contractual capacity: All parties signing the agreement must be of sound mental capacity and able to understand the terms of the contract. Contractual capacity can be compromised by age, mental infirmity, or intoxication.
The subject matter must be legal: No parties may enter into an agreement with the purpose of using the property for illegal activities.
Lead-based paint disclosure: Any home built before 1978 must include a lead-based paint disclosure.
Dispute resolution clause: Legal disputes can arise suddenly and sometimes without provocation. A resolution clause guides both parties on what must be done if a disagreement occurs.

Key Components in a Real Estate Purchase Agreement

As with any legal contract, there are a few key components that must appear on your real estate purchase agreement. Understanding what should appear on your contract and what these terms mean is essential in a successful transaction.

Bear in mind that there can be more components included based on your specific state or property. However, the basic elements that are standard across all of these purchase agreements include:

Buyer and seller details
Property details
Purchase price
Type of ownership being transferred
Representations and warranties
Contingencies
Financing

If you’re using a real estate purchase agreement template, ensure it’s from a reputable source that includes all of these key components.

How to Write a Real Estate Purchase Agreement

You can draft a real estate purchase agreement from scratch or use a template to help get you started. Follow the below steps when drafting your contract to ensure you don’t miss any vital information.

Step 1: Describe the Property

Start by describing the property. This should include your legal land description, which you can get from your local county clerk-recorder office. Apart from this, you should also include other descriptions, such as any furniture or fixtures inside the building, the general condition of the property, and any disclosures required by state law.

Step 2: Provide Buyer and Seller Details

You must also include the full names, addresses, and contact details of all parties involved in the transaction. If the agreement is between multiple parties, then all of their details must appear on the contract.

Step 3: Define the Sale Details

Several sale details need to be defined in your real estate purchase agreement. These include:

The total purchase price
The deposit amount required
When the deposit is due
Who will hold the deposit until the transaction is completed?

Step 4: Set Any Conditions

There are many different conditions or contingencies that you can include in your agreement. These conditions must be met before the deal’s closing date, or either party can cancel the agreement. One common condition is the buyer being approved for financing or finalizing the sale of another property. Another condition is to require a new land survey or building inspection.

Step 5: Add Final Details

Next, you can add any final details, such as the closing date. Along with the closing date, you should also specify whether the buyer will take occupancy on the closing date or if they’ll temporarily lease the property if the occupation date is different. There’s typically a period between the offer and closing date to allow either party to meet any conditions set forth in the agreement.

Step 6: Outline Conflict Resolution Tactics

When drawing up your agreement, it’s important to mention how conflicts will be resolved if they come up during the transaction. Typical conflict resolution options include mediation or arbitration. Both options involve a neutral third party who oversees the issue until it can be resolved amicably.

Common Terms and Definitions

When it comes to a real estate purchase agreement, there may be some unfamiliar terms. Let’s take a look at a few of the most common terms and their associated definitions:

Earnest money

This is the deposit that the buyer pays to demonstrate their commitment to the sale. This payment is returned if the sale falls through. If the deal closes, this amount is credited towards the down payment.

Down payment

The down payment is the amount of money the buyer puts towards the final price to qualify for financing.

Escrow

When you buy a property, the earnest money is paid to an escrow agent who keeps the money until the deal closes. In most cases, the buyer and seller will split any related escrow costs.

Proration

There are annual homeowner costs associated with any property. The buyer and seller decide how these costs will be split once the deal closes. Usually, it’s calculated pro rata based on the closing date.

How To Terminate a Real Estate Purchase Agreement

Once both parties have signed the agreement, they’re bound to the terms set forth therein. This means that either party can enforce the terms of the agreement. However, terminating the deal becomes more tricky.

Contingencies are in place to protect the seller’s interest and provide a legal way for them to terminate an agreement without any risk. If the conditions of the agreement haven’t been met, then either party can terminate the agreement. Follow the below process to terminate your real estate purchase agreement.

Step 1: Define the Reason for Terminating

Before you start the process of terminating your agreement, you’ll first need to define the reason behind it. This is because there are certain avenues a seller can use to cancel the agreement without legal penalties. These include certain conditions or contingencies not being met or either party breaching the terms of the contract. However, for other reasons, there may be penalties associated.

Step 2: Consult a Lawyer

If the reason why you’re terminating the agreement isn’t clarified in your agreement, and they aren’t related to unmet conditions or contract breaches, it’s wise to consult a lawyer before terminating. A real estate lawyer will be able to assist in minimizing any penalties related to the termination of the agreement. They’ll also be able to advise on the next steps if the process becomes more complex.

Step 3: Provide a Notice To Terminate to the Other Party

With the help of a lawyer, you can then post a notice to all involved parties to terminate the agreement.

Real Estate Purchase Agreements