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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
If you are ready to start drafting your purchase agreement, post your project needs to ContractsCounsel at no cost , and start receiving responses from attorneys who can help.
Meet some of our Purchase Agreement Lawyers
I am a 1984 graduate of the Benjamin N Cardozo School of Law (Yeshiva University) and have been licensed in New Jersey for over 35 years. I have extensive experience in negotiating real estate, business contracts, and loan agreements. Depending on your needs I can work remotely or face-to-face. I offer prompt and courteous service and can tailor a contract and process to meet your needs.
Tim advises small businesses, entrepreneurs, and start-ups on a wide range of legal matters. He has experience with company formation and restructuring, capital and equity planning, tax planning and tax controversy, contract drafting, and employment law issues. His clients range from side gig sole proprietors to companies recognized by Inc. magazine.
For over thirty (30) years, Mr. Langley has developed a diverse general business and commercial litigation practice advising clients on day-to-day business and legal matters, as well as handling lawsuits and arbitrations across Texas and in various other states across the country. Mr. Langley has handled commercial matters including employment law, commercial collections, real estate matters, energy litigation, construction, general litigation, arbitrations, defamation actions, misappropriation of trade secrets, usury, consumer credit, commercial credit, lender liability, accounting malpractice, legal malpractice, and appellate practice in state and federal courts. (Online bio at www.curtmlangley.com).
Real Estate and Business lawyer.
Davis founded DLO in 2010 after nearly a decade of practicing in the corporate department of a larger law firm. Armed with this experience and knowledge of legal solutions used by large entities, Davis set out to bring the same level of service to smaller organizations and individuals. The mission was three-fold: provide top-notch legal work, charge fair prices for it, and never stop evolving to meet the changing needs of clients. Ten years and more than 1000 clients later, Davis is proud of the assistance DLO provides for companies large and small, and the expanding service they now offer for individuals and families.
Braden Perry is a corporate governance, regulatory and government investigations attorney with Kennyhertz Perry, LLC. Mr. Perry has the unique tripartite experience of a white-collar criminal defense and government compliance, investigations, and litigation attorney at a national law firm; a senior enforcement attorney at a federal regulatory agency; and the Chief Compliance Officer/Chief Regulatory Attorney of a global financial institution. Mr. Perry has extensive experience advising clients in federal inquiries and investigations, particularly in enforcement matters involving technological issues. He couples his technical knowledge and experience defending clients in front of federal agencies with a broad-based understanding of compliance from an institutional and regulatory perspective.
William L Foster has been practicing law since 2006 as an attorney associate for a large litigation firm in Denver, Colorado. His experience includes drafting business contracts, organizational filings, and settlement agreements.