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A real estate purchase agreement is the legal document that protects seller rights when working with a homebuyer. Some specific terms and conditions protect the rights of both parties when engaging in a significant transaction such as this one.
It is essential that you get your real estate purchase agreement right to avoid future complications. The article below describes everything you need to know about real estate purchase agreements:
What is a Real Estate Purchase Agreement?
Real estate purchase agreements, also called real estate contracts, home purchase agreements, real estate purchase contracts, and house purchase agreements, are legal contracts between a buyer and seller for a home sale of real property.
A real estate purchase agreement doesn’t transfer the title of a property. Rather, it is the document that builds and creates a framework of the responsibilities of each party during the transaction so that the title can be transferred in a way both parties are happy with.
Who Needs a Real Estate Purchase Agreement?
You need a real estate purchase agreement if you are selling or buying a house. Depending upon your situation, the person who provides the real estate purchase agreement may vary. You generally have two options when selling a home:
- Represented by a real estate agent
- For sale by owner (FSBO)
Represented by Agent
If the home seller is represented by an agent or Realtor, then the agent is generally responsible for drafting the agreement and arranging for a signing. Typically, the registered agent will go through their attorney to get a copy of the real estate purchase agreement initially since they do not have the authority to give legal advice.
For Sale By Owner
If the seller decides to forgo the added cost of a real estate agent, then the seller is directly responsible for handling the real estate purchase agreement. This strategy allows you to maximize your profits and returns by not paying traditional commissions. However, you are still liable for ensuring that your real estate purchase agreements are legal and valid at the local, state, and federal levels.
Here is an article about for sale by owner (FSBO).
Who Provides the Real Estate Purchase Agreement?
The real estate lawyers of the seller draft the real estate purchase agreement. Since real estate agents are not licensed to practice law, they cannot legally create contracts by or for their clients. Only a licensed attorney in your specific state can offer legal advice when it comes to contracts.
Key Terms in Real Estate Purchase Agreement
There are several key terms in a real estate purchase agreement that you should include and understand to guarantee that your transaction goes as smoothly and quickly as possible. You will also want to ensure that your contracts are enforceable and valid to avoid futured disputes.
Key terms in a real estate purchase agreement include:
Key Term 1. Buyer and Seller Details
Get the contact information of the other party, including their address. This information should match the information on file with the court clerk’s office. For more than one buyer involvement, they should determine if they will purchase as joint tenants or joint tenants in common.
Key Term 2. Property Details
Properly identify the property being sold, as well as the exact address, legal description, and other necessary information. You can obtain copies of these through the county court clerk’s office. They can provide you with the copies of documents that you need for a real estate purchase agreement, such as a warranty deed, deed of trust , or quitclaim deed.
Key Term 3. Purchase Price
You must also negotiate the purchase price with the buyer beforehand as well. The terms and conditions must include how much they will pay, including real estate tax, as well as how they will be paying. Popular methods of homebuying include cash payments, down payments with a mortgage, or a new mortgage.
Key Term 4. Representation And Warranties
You must also give the buyer reassurance that the claims you are making in the real estate purchase agreement are accurate. After all, they are making a major purchase, and buyers have a legal right to specific assurances. Your real estate purchase agreement will need to guarantee that the statements contained within are true and accurate.
Key Term 5. Financing
If the home buyer is financing the home with a loan through the seller or HUD financing, you will need to include the specifics of the transaction related to the loan, including:
- Annual percentage rate (APR)
- Balloon mortgage payment
- Default terms and conditions
- Debt-to-income ratio requirements
- House flip terms and conditions
- Closing costs and title insurance fees
You are assuming several risks if you offer seller financing. However, you can stand to gain a massive return on your investment. The most practical way to ensure that a buyer does not get away with violating your rights, create specific financing terms that are flexible enough for the market without taking away from your rights as a seller.
Image via Pexels by Binyamin Mellish
Key Term 6. Contingencies
A real estate purchase agreement’s legalities are based upon the fact that specific conditions are met. Some of these contingencies include inspection, appraisal , financing, and title contingencies. The inspection contingency is one of the more time-consuming aspects since the results of a walkthrough and appraisal largely affect a significant portion of the transaction.
Key Term 7. Lead-Based Paint Disclosure
If you are selling a home that was built before 1978, then you need to let potential buyers know if any areas contain lead paint in a lead-based paint disclosure. They have a legal and fundamental right to know if they are being exposed to hazards. Many states have their own legislation on disclosures which means you should get legal help from real estate lawyers regarding compliance.
Key Term 8. Dispute Resolution Clause
A legal dispute can arise at any given moment. It is for this reason that we address how to handle disputes and dispute resolution clauses in real estate purchase agreements. If you wish to keep legal disputes fairly inexpensive and away from public record, use alternative dispute resolution methods, such as a mediation or arbitration, if a real estate lawyer thinks it makes sense to do so in your specific situation.
Key Term 9. Earnest Money Deposit Amounts
Buyers make an earnest money deposit to demonstrate their ability and desire to purchase your home. This process usually involves depositing money into an escrow account until the mortgage note closes. Until you receive an earnest money deposit amount, you can continue running your advertised home listings.
You may need to insert additional language into your contract depending upon the transaction and geographical locations. Laws in home sales vary from state to state, which means that you will need to incorporate relevant requirements into your real estate purchase agreements. Get help with a real estate purchase agreement by working with a legal professional.
Get Help With a Real Estate Purchase Agreement
Get help with a real estate purchase agreement by speaking with real estate lawyers. They will ensure that you create an enforceable and legally binding document when selling your home, as well as advising on other local laws you should be aware of. For example, there are other critical laws that affect your ability to be approved for a mortgage, including guidelines set forth by the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA) .
You Deserve Fair Terms
Unsavory lenders, as seen in the Fannie and Freddie cases, can take advantage of your vulnerable positions. Homeowners may also look toward making a quick buck. Do not let them gain the upper hand when engaging in one of your biggest lifetime expenses, so hire a lawyer to protect your rights from the outset.
Meet some of our Real Estate Purchase Agreement Lawyers
Seasoned technology lawyer with 22+ years of experience working with the hottest start-ups through IPO and Fortune 50. My focus is primarily technology transactions with an emphasis on SaaS and Privacy, but I also provide GC services for more active clients.
I am a California-barred attorney specializing in business contracting needs. My areas of expertise include contract law, corporate formation, employment law, including independent contractor compliance, regulatory compliance and licensing, and general corporate law. I truly enjoy getting to know my clients, whether they are big businesses, small start-ups looking to launch, or individuals needing legal guidance. Some of my recent projects include: -drafting business purchase and sale agreements -drafting independent contractor agreements -creating influencer agreements -creating compliance policies and procedures for businesses in highly regulated industries -drafting service contracts -advising on CA legality of hiring gig workers including effects of Prop 22 and AB5 -forming LLCs -drafting terms of service and privacy policies -reviewing employment contracts I received my JD from UCLA School of Law and have been practicing for over five years in this area. I’m an avid reader and writer and believe those skills have served me well in my practice. I also complete continuing education courses regularly to ensure I am up-to-date on best practices for my clients. I pride myself on providing useful and accurate legal advice without complex and confusing jargon. I look forward to learning about your specific needs and helping you to accomplish your goals. Please reach out to learn more about my process and see if we are a good fit!
I am a NY licensed attorney experienced in business contracts, agreements, waivers and more, corporate law, and trademark registration. My office is a sole member Law firm therefore, I Take pride in giving every client my direct attention and focus. I focus on getting the job done fast while maintaining high standards.
A twenty-five year attorney and certified mediator native to the Birmingham, Alabama area.
Longtime corporate real estate counsel with specialities in commercial leasing, contracts, corporate governance, and general small business/startup/entrepreneurship legal issues.
I absolutely love helping my clients buy their first home, sell their starters, upgrade to their next big adventure, or transition to their next phase of life. The confidence my clients have going into a transaction and through the whole process is one of the most rewarding aspects of practicing this type of law. My very first class in law school was property law, and let me tell you, this was like nothing I’d ever experienced. I remember vividly cracking open that big red book and staring at the pages not having the faintest idea what I was actually reading. Despite those initial scary moments, I grew to love property law. My obsession with real estate law was solidified when I was working in Virginia at a law firm outside DC. I ran the settlement (escrow) department and learned the ins and outs of transactions and the unique needs of the parties. My husband and I bought our first home in Virginia in 2012 and despite being an attorney, there was so much we didn’t know, especially when it came to our HOA and our mortgage. Our real estate agent was a wonderful resource for finding our home and negotiating some of the key terms, but there was something missing in the process. I’ve spent the last 10 years helping those who were in the same situation we were in better understand the process.
Samantha has focused her career on developing and implementing customized compliance programs for SEC, CFTC, and FINRA regulated organizations. She has worked with over 100 investment advisers, alternative asset managers (private equity funds, hedge funds, real estate funds, venture capital funds, etc.), and broker-dealers, with assets under management ranging from several hundred million to several billion dollars. Samantha has held roles such as Chief Compliance Officer and Interim Chief Compliance Officer for SEC-registered investment advisory firms, “Of Counsel” for law firms, and has worked for various securities compliance consulting firms. Samantha founded Coast to Coast Compliance to make a meaningful impact on clients’ businesses overall, by enhancing or otherwise creating an exceptional and customized compliance program and cultivating a strong culture of compliance. Coast to Coast Compliance provides proactive, comprehensive, and independent compliance solutions, focusing primarily on project-based deliverables and various ongoing compliance pain points for investment advisers, broker-dealers, and other financial services firms.