A real estate purchase agreement is a legally binding contract between a party selling property and a party purchasing property. This agreement is not a sale contract, but a contract that will govern how the sale will work. It includes the sale price, deposit requirements, and contingencies that must be met before the sale can be completed.
What is a Real Estate Purchase Agreement Review?
A real estate purchase agreement review describes the process of carefully reading and analyzing the terms and conditions laid out in the contract. Contract review gives both parties the opportunity to go over the provisions, ensure that what is written in the contract reflects the deal that was made, and clarify any ambiguous terms.
Most parties engaged in a real estate transaction seek the legal guidance of a real estate attorney to assist with contract drafting, review, and negotiations. When a real estate lawyer reviews a purchase agreement, they will confirm that the contract is complete and free from mistakes. The lawyer will also go over the terms and conditions to ensure that their client’s interests and rights are fully protected.
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What Should Be in a Real Estate Purchase Agreement
Real estate purchase agreements must include key elements and clauses to protect both parties and facilitate a smooth sale of property.
The following clauses will be found in most real estate purchase agreements:
- Party information. The names, addresses, and contact information of the buyer and the seller.
- Property details. The property address along with a legal description and any other distinguishing details.
- Purchase Price. The amount the buyer has agreed to pay for the property including deposits and any additional costs or expenses.
- Disclosures. Facts about the property made by the seller about the condition of the property. This will also include defects in the property that could affect the value.
- Contingencies. Conditions that must be met before the deal can be finalized. Some common contingencies include home inspection, appraisal, financing, and title contingencies.
- Financing terms. How the buyer will pay for the property including details about the loan or lender if applicable.
- Fixtures and appliances. What items are included or excluded from the sale.
- Property taxes. Information about taxes imposed on the property.
- Seller assist. Whether the seller will pay part of closing costs.
- Earnest money. The terms and conditions surrounding an earnest money security deposit which is used to show the seller the buyer is serious about purchasing the property.
- Closing Date. The day that the deal will be finalized.
- Signatures. A real estate purchase agreement must be signed by both parties to be valid.
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How to Review a Real Estate Purchase Agreement
To review a real estate purchase agreement, follow these steps:
- Read the entire contract from beginning to end.
- Make note of any terms that need to be defined or clarified.
- Verify that all information in the contract reflects the terms agreed upon by the parties.
- Double-check deadlines and timelines including when contingencies must be met by, when deposits are due, and the closing date.
- Consult with a real estate lawyer.
Reviewing a real estate purchase agreement is an important step in the home buying process and it should not be skipped or ignored. Hiring a lawyer to conduct a contract review is the best way to ensure that the agreement is fair, legally binding, and represents your best interests.
A lawyer can go over the contract with you to ensure that you understand all of your rights and obligations and that the contract reflects your intentions.
What Should I Look for in a Sales Agreement for a House?
When reviewing a sales agreement for a house, the most important terms to look for are the provisions that cover disclosures and contingencies.
Disclosures. The legal requirement for a seller to disclose certain information about a property to a buyer. These disclosures are intended to provide buyers with important information that may impact their decision to purchase the property. Each jurisdiction requires different types of disclosures but the most common include:
- Property condition disclosures. Includes issues with the structure, roof, or electrical systems or the presence of pests.
- Environmental disclosures. Hazards like the presence of mold, radon, or lead based paint.
- Property history disclosures. Any significant events that could affect the value of the property like criminal activity or damage from natural disasters.
- Homeowners’ association disclosures. If the property is subject to an HOA, the seller should disclose fees, regulations, and any pending litigation with the association.
Contingencies. Conditions or requirements that must be met for a real estate transaction to proceed. Contingencies provide protection for the buyer and allows the buyer to back out of the deal or negotiate changes if certain conditions are not satisfied. Common contingencies include:
- Financing contingency. Allows the buyer to cancel the contract if they cannot secure financing for the property.
- Home inspection contingency. The buyer has the opportunity to have the home inspected by a professional and if it doesn’t pass, the buyer can negotiate necessary repairs or terminate the contract.
- Title contingency. The title to the property must be clear and marketable. If any liens or encumbrances are found during the title search, the contract can be terminated.
- Sale of existing property contingency. If a buyer needs to sell their current property, this contingency protects the buyer by ensuring they can sell their current property before purchasing the new property.
While all terms in a real estate purchase agreement are important, disclosures and contingencies are put in place to specifically protect the buyer’s interests. When reviewing a real estate contract, be sure that these provisions are included.
Common Pitfalls in Real Estate Purchase Agreements
When a purchase agreement is not drafted or reviewed properly, it can have significant legal and financial consequences for both parties. Failure to include certain provisions or ambiguous terms can lead to a dispute between the parties and possible litigation.
Common pitfalls in real estate purchase agreements include:
- Incomplete or ambiguous terms that lead to confusion and disputes
- Failure to provide adequate protection with disclosures and contingencies
- Unclear provisions about which party will be responsible for repairs
- Inadequate details about financing, deposits, and closing costs
- Failure to abide by applicable laws
To avoid these common pitfalls, it is recommended that you hire a real estate attorney to review your purchase agreement before agreeing to the terms.
Should I Hire a Lawyer to Review a Real Estate Purchase Agreement?
Yes. Whether you are selling the property or buying the property, it is always highly recommended that you hire a lawyer to review the real estate purchase agreement. When you hire a lawyer, their job is to advocate for you throughout the transaction.
Your lawyer will review the purchase agreement and will ensure that the contract protects your interests. Your lawyer can assist with renegotiating any adverse terms and check to make sure the contract follows all laws and is legally enforceable in the event a dispute arises.
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