Whether you’re a buyer who is ready to put an offer on your dream home or a seller getting ready to send out a counteroffer, it’s important to know what belongs in your final purchase agreement. Although your REALTOR® will be able to walk you through the process, it’s always a good idea to have a baseline understanding when you enter into a binding contract—which is exactly what a signed purchase agreement is!
Today we’ll take a walk through the different parts of a standard real estate purchase agreement. Although no two agreements are exactly the same, these are great starting points that will help you decide what is important to you as you sell (or buy) your next home.
What is a purchase agreement?
A real estate purchase agreement is a document covering every element of your sale, from beginning to end. It protects all the parties involved and clarifies any expectations those parties have about the transaction. These agreements are often long and may include unfamiliar language for first time sellers and buyers. But despite the document’s length (and possibly, its complexity) it’s vital to go over it with a fine-tooth comb and fully understand what it is you’re agreeing to. That’s one thing that makes a qualified REALTOR® indispensable!
Here are some things you might expect to cover in a purchase agreement:
1. The involved parties
It’s important to clearly state who the buyer(s) and seller(s) are in your contract. But beyond that, you’ll also need to clarify what relationship multiple buyers will have as far as ownership. Will they be joint tenants, tenants in common, or something else entirely? In other words, what happens to the property if one of the new owners should die?
2. The property in question
An accurate address for the property will appear on the agreement, but a legal description is needed, as well. This includes detailed information about the location and boundaries of the lot, and may list things like the acreage and any notable features of the property. This description can be found on the property’s current deed, or you can find the public record through the appropriate county. For example, here in Hancock County, the information is conveniently located online through the Recorder’s Office.
3. The terms of the agreement
The meat and potatoes of your purchase agreement lie in the actual terms you agree upon with the other party:
Price and payment method
You’ll want to list what the property is selling for, of course! But there’s a lot to be ironed out in addition to that. Will there be an earnest money deposit? If so, how much and will it be put toward the final purchase price? How will closing costs be divided? Will the buyer pay in cash or finance through a lender—and if they do finance, will there be a down payment? The answers to some of these questions may be put into a financing addendum, or they may go directly into the main purchase agreement. Either way, you want to be sure it is all laid out clearly before signing.
Anything included with the property
This can mean something as simple as window treatments or something as large as a major appliance. There is a lot that can be included…if both parties agree to it. Buyers, it’s a good idea to give this section a close read because some items that may have been visible when you went to a showing may not be included in the sale. Even if it was in the listing, nothing is final until the purchase agreement becomes legally binding! If an item is permanently joined to the property, it is usually assumed to be included in the sale, but don’t leave anything to chance. It never hurts to be extra clear.
If you are including any contingencies (for example, inspection, home sale, or title contingencies) they will also need to be included in the purchase agreement in order to be legally binding.
It may seem like a small thing, but actually getting the buyer in the door after closing is an important detail! You may even see it spelled out in your agreement how the keys will be transferred. Again, it never hurts to be as clear as possible.
Although it’s not something anyone hopes for, it’s still necessary to state what the next step is if one or both parties default on their side of the agreement. While it’s no fun to talk about, it’s good to know what to expect if it should happen.
4. The Timeline
The timeline of the agreement is every bit as important as the terms. It’s the first step in a timely closing! Be sure to cover the deadlines for any contingencies included, as well as delivery, acceptance, and expiration dates for the agreement, itself.
There are certain things the seller will need to disclose if it applies to their property. Depending on the local regulations, this could be:
- Lead paint
- Well location
- Radon history
- Water damage or mold
- Past or current termite activity
…or possibly, certain repairs and insurance claims made. Sellers should absolutely confer with their REALTOR® to decide what should go into the purchase agreement, but when in doubt, it’s best to disclose anything that could potentially be hazardous to your buyers.
Now for the big one: the signatures of all parties involved. This is what makes your purchase agreement a legally binding document. Even though you’ve probably been over the whole document with your REALTOR®, give it another once-over before putting pen to paper—signing a purchase agreement is a big deal!
Need a qualified REALTOR®? Our team is ready and waiting to list your property or help you find the perfect home!