When you buy or sell a home, there are essential documents you must fill out. Most of these documents protect you in some way.
And whether you’re a buyer or a seller, a real estate purchase agreement is one of the core pieces of paperwork that you cannot overlook.
You’re about to make a huge decision – and you want the details to exact. If they’re not, or if the other party doesn’t follow through, can you cancel the purchase agreement?
Let’s find out!
What is a Purchase Agreement?
A real estate purchase agreement is a legal binding document stating both the buyer and seller have agreed on a deal. Once a purchase agreement is signed, you’ll see an “under contract” sign listed on the home in question.
This agreement is also called a home purchase agreement or a real estate contract, but all phrases have the same concept. Regardless of the name, the document states the main elements of the home sale.
9 Key Things to Include in a Purchase Agreement
Here are the key things a purchase agreement will include.
1.Buyer and seller information
It’s crucial to obtain identity verification from all parties involved. If there are two sellers and two buyers, then all four people should be verified and listed.
2. Property Details
You’ll need a legal description and official records of the property in question, as well as the exact physical address.
3. Pricing and Financing
It should be stated how much money the buyer is paying in earnest money. The agreement should also state what money will be credited toward once the purchase is made.
4. Fixtures and appliances included in sale
Is the buyer demanding that the dishwasher and refrigerator stay as part of the selling price? If so, this needs to be stated. If the seller is agreeing to leave fixtures and appliances, it needs to be stated even if the buyer has not requested those items.
5. Closing and possession dates
The exact date of closing on the home should be listed in the purchase agreement. This helps all parties prepare for the day and not overlap other appointments. Closing takes approximately 2 hours, but that time can always fluctuate depending on the details of the transaction.
6. Down Payment
Down payments are determined way before the purchase agreement requirements are outlined. However, this amount still needs to be stated.
7. Closing costs and who is responsible for paying
It should be stated who is responsible for closing costs. This is an expense that both parties may not be prepared for since it’s generally between 2% to 5% of the final selling price of the home. There are different methods for paying for closing costs and this should be discussed before closing with your real estate agent, then outlined in the agreement.
8. Conditions in which the contract will be terminated
Both parties are presented with various chances to terminate the purchase agreement and sale. For instance, if a contingency is not properly met or if either party does not do as they said. The purchase agreement specifies the right steps and actions to take so that lawsuits are not taken out.
9. Contingencies that must be met for the sale to go through
Both buyers and sellers must agree to meet contingencies before closing. For example,
- Has a home inspection been completed by someone the buyer hired?
- Did the appraised value match the purchase price, or does the buyer need to negotiate?
- Is the buyer protected with a financing contingency?
- Is the title contingency stated that each party will receive their new titles after the transaction?
Get Help Drafting Your Purchase Agreement
A great real estate agent will ensure that the purchase agreement includes all details to keep you legally safe.
A purchase agreement is one of the many documents you’ll have to sign in order to buy and sell a home. It’s important to understand purchase agreement requirements and how to back out if you must.
Need help navigating the home loan and purchase process? Check out our 5 simple steps that will help guide you!