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Need help with a Purchase Agreement?
A purchase agreement, also known as a real estate purchase agreement and purchase and sales agreement, is a legal instrument between two or more parties for the purchase and transfer of an asset, which is typically a residential, commercial, or industrial property. The general rule of thumb on these documents is that you use a purchase agreement when the transaction exceeds $500.
What Is A Purchase Agreement?
A purchase agreement formalizes the details of an asset purchase. A purchase agreement establishes the terms and conditions of the transaction, including price, limitations, legal disputes, and contract governance. They can be signed digitally or using ink and entered into by all parties’ free will in the transaction.
When Is A Purchase Agreement Needed?
There are several types of purchase agreements. They can be used for the purchase and sale of almost any kind of asset. However, they are most commonly used for large transactions that exceed the normal scope of business.
For example, a business may sell computers to consumers that cost $1,000. A receipt is typically issued for this transaction since the implications of the sale, price, and limitations are different from that of a large asset or real estate purchase.
A buyer or seller may use a purchase agreement to facilitate the following types of transactions:
- Sale or purchase of real estate
- Large volume purchases
- Used equipment purchases
- Mutual preference sales
- Motor vehicle purchases
- And more
In general, it is wise to hire transactional lawyers online to help you draft the first iteration of the purchase agreements, which can also make modifications during the negotiation process. This strategy prevents legal mistakes from being made while remaining compliant with the governing local, state, and federal laws.
What Happens After Signing A Purchase Agreement?
After signing a purchase agreement, you then finalize the sale. How you structure the closing ultimately depends upon the terms and conditions set forth in the agreement. Ensure that you read your requirements carefully to execute the deal as anticipated fully.
Here is what generally happens after the signing of a purchase agreement:
- Fund escrow with an escrow company to handle the paperwork if necessary
- Confirm the funding with the company or listing agent for real estate transactions
- Hire third-party experts, such as licensed inspectors, to evaluate the condition of the asset or property before escrow release
- File a report with both the buyer, seller, and other relevant third-parties to confirm the condition of the asset or property
- Sign the escrow, loan, promissory, and deed to close on the asset
- Buyer releases escrow to the seller, which signifies the end of this part of the transaction
It is not uncommon for several US states to allow for a grace period to rescind a loan required for the purchase. This grace period may affect escrow release since the escrow company may wait until it passes. Thereafter, the transaction is completely closed.
What Is The Difference Between A Real Estate Sales Agreement And Purchase Agreement?
While a purchase agreement can be used for any large transaction, a real estate sales agreement is used to sell and transfer residential, commercial, or industrial property.
Different names for a real estate sales agreement may include:
- Purchase agreement for house
- Real estate purchase contract
- For sale by owner purchase agreement
The difference between a real estate sales agreement and a purchase agreement may also consider the role of the person offering it. The seller uses a real estate sales agreement, while the buyer uses a real estate purchase agreement to present an offer.
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Parts Of A Purchase Agreement
While the asset being sold under a purchase agreement may vary from transaction-to-transaction, the sections are generally the same. Essentially, there are specific elements that you must include for it to be lawful and enforceable according to the governing jurisdiction. Ensure that you contain the following features in your purchase agreement at a minimum.
Article 1: Recitals
You must include the names, business names, and addresses of the parties involved, the date that the agreement goes into effect, and a general acknowledgment and agreement to the terms contained therein. If the agreement is for a real estate transaction, be sure to address tenancy if applicable.
Article 2: Sale Inclusions and Exclusions
List the specific assets that you are transferring and details that describe them as such. If you are buying or selling property, list all sales inclusions and exclusions in the transaction, as well as inspection requirements, appraisals, financing, and titling.
Article 3: Disclosures
The seller must disclose information about the asset or property that could impact the value or sale. Examples of disclosures should include lead hazards, well locations, asbestos hazards, and other pertinent facts.
Article 4: Pricing Terms and Conditions
Next, you will want to address how much the asset or property will cost as well as the terms and conditions surrounding the price. You can also include how the structure of the deal will be made, including cash payments, loan options, closing costs, and more. You should also have the dates of each transaction as well.
Article 5: Possession Terms and Conditions
This section describes how and when the transfer and possession of the asset or property will go. For example, describe when the keys of the property will be delivered for real estate transactions.
Article 6: Default Clause
Buyers and sellers must offer each other the opportunity to cancel the purchase agreement when a provision goes unsatisfied. For example, not paying for the transaction according to the terms could result in the contract entering into default. The default clause should address what steps or actions should be taken if a default occurs.
Article 7: Dated Signatures from All Parties
For a purchase agreement to be valid, it must be executed or signed by all parties. Create a separate date and signature line for each signing individual since it is possible that the signing could occur on different dates.
How To Write A Purchase Agreement
While there are numerous purchase agreements available for reuse online, there are problems with this method. First, they were created for another business or person, and the particulars may not entirely meet your situation’s needs. Start by making a list of the essential parts of the transaction to account for the agreement.
Then you will want to hire property lawyers to draft the first iteration of the purchase agreement. You can then use the document as a jumping-off point when it comes to the negotiation of the transaction’s finalization. As the deal becomes more evident, you can return to your attorney, who can provide legal advice and make modifications to the first draft of the agreement.
Preparing A Purchase Agreement
Since purchase agreements affect your legal rights, you should discuss the drafting and execution of the deal with transactional lawyers licensed to practice in your state. You should also consider working with a legal professional that has experience in the specific area of practice for the type of contract you are drafting. For example, transactions involving real estate should be prepared by real estate lawyers .
ContractsCounsel Will Help You Prepare a Purchase Agreement
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Meet some of our Purchase Agreement Lawyers
Brandon is a Texas Super Lawyer®, meaning he is among the top 2.5% of attorneys in his state. He has designed his practice to provide a unique ecosystem of legal support services to business and entrepreneurs, derived from his background as a federal district law clerk, published biochemist, and industry lecturer. Brandon is fluent in Spanish, an Eagle Scout, and actively involved with the youth in his community. He loves advocating for his clients and thinks he may never choose to retire.
Firm rated best ADR firm for Wisconsin and won an award for cultural innovation in dispute resolution from acquisition international magazine in 2016 and it was rated "Best of Brookfield" by Best Businesses in 2015. Attorney Maxwell C. Livingston was rated 10 best in Labor & Employment Law by American Institute of Legal Counsel and 40 Under 40 by American Society of Legal Advocates for 2016; he also won 10 Best by American Institute of Family Law Attorneys. He is licensed in Wisconsin in all state and federal courts, and in the 7th Circuit Court of Appeals, wherein he won a landmark decision in McCray v. Wielke.
Richard is a wizard at taking on bureaucracies and simply getting the job done. His clients value his straight-forward counsel and his ability to leverage a top-notch legal staff for efficient and effective results. Richard is a professional engineer, professor of law, and has been named among the top 2.5% of attorneys in Texas by the Super Lawyers®. When he is not driving results for his clients, Richard can be found with his small herd on his Texas homestead.
Experienced attorney and tax analyst with a history of working in the government and private industry. Skilled in Public Speaking, Contract Law, Corporate Governance, and Contract Negotiation. Strong professional graduate from Penn State Law.
I am an attorney admitted in NY, with over 6 years of experience drafting, reviewing and negotiating a wide array of contracts and agreements. I have experience in Sports and Entertainment, Real Estate, Healthcare, Estate Planning and with Startup Companies. I am confident I can assist you with all of your legal needs.
Rishma D. Eckert, Esq. is a business law attorney who primarily represents domestic and international companies and entrepreneurs. A native of both Belize and Guyana, she remains engaged with the Caribbean community in South Florida: as a Board Member and General Counsel for the Belize American Chamber of Commerce of Florida, and Member of the Guyanese American Chamber of Commerce. She holds a Bachelor of Laws degree (LL.B.) from the University of Guyana in South America, a Master’s degree in International and Comparative Law (LL.M.) from Stetson University College of Law in Gulfport, Florida, and earned a Juris Doctor degree (J.D.) from St. Thomas University School of Law in Miami, Florida. Licensed to practice in the State of Florida and the Federal Court in the Southern District of Florida, Mrs. Eckert focuses her passion and practice on domestic and international corporate structuring and incorporation, corporate governance, contract negotiation and drafting, and trademark and copyright registrations.
Mark A. Addington focuses his practice primarily on employment litigation, including contractual disputes, restrictive covenants (such as non-competition, non-solicitation, or confidential information restrictions), defense of wage and hour, harassment, retaliatory discharge, disability, age, religion, race, and sex discrimination.