Free Real Estate Purchase Agreement Templates (PDF – Word)

A real estate refers to any property that includes land, building, and other resources naturally existing within a region. For too long, the real estate business has remained one of the most lucrative yet the riskiest business ever. Therefore, for one to venture into it, you need to put a lot of factors into consideration to ensure everything goes well. Among the most important factors to consider is the Real Estate Purchase Agreement.

A real estate purchase agreement, also known as a real estate sales contract, is a binding contract that lays out important terms of a real estate deal between the buyer and the seller. Often times than not, the real estate purchase agreement covers every element of a real estate transaction, including the price, terms of payments, key witnesses, among others. However, it’s important to note that the agreements vary significantly from one state or region to the other.

For many, understanding a Real Estate Purchase Agreement presents a major challenge. However, as a prospective real estate buyer/seller, it’s advisable that you fully understand the basic components of the agreement. This will make you confident about what you are signing, especially if you are a first-timer. The following therefore are some of the common components:

Financing

When engaging in a real estate business, financing is a common term you’ll frequently use in your dealings. Basically, financing refers to how your transactions will be paid for. It can either be informed of loan, mortgage financing, among other forms.

Earnest money deposit

The Earnest Deposit Money, also known as good faith deposit, refers to the deposit made by the buyer to stress his or her seriousness on buying the real estate. It helps the seller know that the buyer is indeed committed to buying the property and will not back out anytime soon.

However, if the buyer decides to quit out of the deal due to any other reason not highlighted within the contract, then the buyer will lose the earnest money deposit to the seller. On the contrary, if the buyer decides to pull out from the contract due to any breach of terms as stipulated in the contract, then the buyer will receive their earnest of money back.

It’s also important to note that earnest money deposit is often held by escrow. After a successful transaction, the escrow will deposit the money to the appropriate party according to the laid out agreement.

Contingencies

A real estate purchase agreement often contains several forms of contingencies. Basically, a contingency refers to any terms and conditions that must be met by both the transacting parties to ensure a smooth and efficient transaction. The following are some common forms of contingency you should be aware of:

Financing contingency

A financial contingency is often obligated to the property buyer. It helps protects the buyer should they fail to secure a mortgage.

Inspection contingency

After the buyer is presented with the inspection report, he or she may be dissatisfied with the outcome. Therefore, they may opt to pull out of the sales; in that case, the inspection contingency will help protect them from being penalized.

Appraisal contingency

This contingency demands that the property should be appraised at a value similar to or greater than what the buyer agreed to offer.

Title insurance

Title insurance refers to a form of insurance that covers the loss of value of the property should the buyer realize some defects in the future. This insurance is often given to the property buyer upon the successful completion of the real estate transaction.

Escrow

Escrow often refers to a third party that plays the role of holding the funds while the transactions are still underway. The buyer will deposit the finds to the third party as they wait for other conditions to be met. Once everything is in order, the escrow will release the funds to the intended seller. This system helps to reach a win-win situation during a real estate transaction.  

Closing

This refers to the final step of the real estate transaction. Before reaching this step, both the parties always ensure that everything is clear and finalized. The buyer completes the payments and the seller hands over the title deed.

A real estate purchase agreement is a complex document comprising many sections. Before you begin crafting the document, it is essential to know what information needs to be discussed in the agreement. Below are some essential items that should be included in the purchase agreement:

Buyer and seller details

The identity of the buyer and the seller should be included in this section. In addition, the buyer’s name, address, and contact details should be mentioned in the document as well, as the seller’s name, address, contact details, and authority for signing the agreement should also be included in this section.

Property details

This section should contain details about the property that is being sold. For example, the exact address of the property, its legal description, date of the last sale, amount of any liens/encumbrances on the property being sold, and other related information should be included in this part.

Purchase price

The total amount that the buyer is to pay for the property should be included in this section. In addition, the amount of principal and interest should also be given here, along with other monetary terms used in the agreement.

Personal property

Personal property or fixtures within the property, such as fridges, furniture, appliances, etc., should be identified in this section. If any, the buyer’s amount to pay for the personal property should also be included in this section.

Representations and warranties

This section should contain representations and warranties by the seller concerning the property. Representations are statements of fact or opinion, while warranties are promises that must be kept. For example, a representation may be like, “The seller has never used the property for commercial purposes.” Any representations and warranties made by the seller or any other person associated with the sale of the property should be included in this section.

Title insurance

This section should contain the details of any title insurance required to be purchased. Title insurance protects the buyer against defects in the property’s title that is not disclosed by the seller that may cause a loss in value or require extensive repair work to the property.

Closing and possession dates

The dates of the closing and possession of the property should be included in this section. The seller must transfer the property’s title to the buyer before closing. The parties may agree on different possession dates. However, both parties must understand that a later date may also mean the cancellation or rescheduling of any existing rental agreements and a delay in any plans made by either party.

Lead-based paint disclosure

This section should state any information relating to lead-based paints. The seller must disclose any information relating to lead-based paints on the property, and a licensed inspector should confirm their presence. Any such information disclosed by the seller should be mentioned in this section, along with an estimated cost of any repainting work required.

Benefits of Using a Template

A real estate purchase agreement template is a document that outlines all the terms and conditions required to execute a real estate sale transaction. The template guides the buyers and sellers as they move through the entire purchase process. Other benefits of using a real estate purchase agreement include:

• A real estate purchase agreement template eliminates all the guesswork involved in drafting such a document. For example, the template will contain all the clauses required by law to be included in an agreement of this kind. This ensures that you comply with state stipulations regarding real estate sales contracts. The template will also include any additional legal provisions required to make it a legally binding document.
• A real estate purchase agreement template saves you time drafting such a document. Unfortunately, most people do not know where to start when drafting a real estate contract. Therefore, you must learn how to draft a real estate purchase agreement.
• A real estate purchase agreement template will help you ensure that all the terms contained in the contract are unambiguous. In addition, a clear written document is easy to understand. It will significantly simplify negotiating with a third party who might purchase or sell the property on your behalf.

Buying a property is one of the greatest investments a person can make during his lifetime. The process is always detailed and hence challenging, especially if you are a beginner. The following therefore are some insights you can use to know what is expected.

Find the property under sale

Just like a job search, looking for a property with a suitable location, amenities, and other infrastructure can be time-consuming. Therefore, you can do your search either on the internet, get a family or friend referral, or use a real estate agent.

Ge a prequalification letter

Once you’ve settled on a property, you need to get a prequalification letter from your bank. This letter certifies that the buyer is indeed able to afford the given property.

Attend open houses

With your prequalification letter at hand, you can visit the open house and view the houses. This can be done either by the buyer himself or through their agents. If the property catches the buyers’ interest, they will proceed to the next step, writing an agreement.

Write a real estate purchase agreement

This is the most crucial step while buying a property. The buyer will write the agreement and give it to the seller to approve.

Sellers discourse

If the seller agrees with the purchase agreement, he or she will sign it and complete a disclosure form. The disclosure form will notify the buyer whether or not there are any repairs to be made. An earnest money receipt may be issued if it’s part of the agreement.

Inspection

The home is then inspected by a certified inspector, and a report availed to the parties.

Financing

Depending on the purchase agreement, the buyer will avail of their financing either through a mortgage or any other financial commitments.

Closing

Usually, it’s recommended to pursue this stage under the watch of an attorney. The ownership of the property will be transferred from the seller to the buyer. Both the associated parties will sign the agreement to make it legal.

A real estate purchase contract is a legally enforceable document. Therefore, the document must be drafted effectively. The following essential tips can help improve the effectiveness of the real estate purchase agreement:

Disclosures

The purchase agreement should include all the representations, warranties, and disclosures that the seller has made. In addition, other vital disclosures that must be made include:

Lead-based paint disclosure: According to the federal lead-based paint disclosure law, all sellers of pre-1978 housing are required to disclose lead-based paint and its potential hazards. The seller must provide a certified lead-based paint inspector who will confirm whether the property contains any lead-based paint. When purchasing a property built before 1978, the buyer may be placing themself at risk of lead poisoning, which could require extensive treatment. Therefore, this information must be disclosed, and buyers should ask the seller to provide an experienced inspector who can adequately assess whether lead-based paints are present in the property. The cost of disclosing any such information should be included in the document.

Property disclosure: All states in the US have a disclosure law that requires property sellers to inform buyers of any known defects in the property which may reduce its value. The property seller must disclose any information they have regarding conditions such as termites or mold growth in or around the property’s structure. The seller is also required to disclose information about any structural and mechanical defects in the property and any other material defects present in the house that may reduce its value or adversely affect its use.

Include all clauses

The purchase agreement should include all clauses that are essential to the transaction, including but not limited to personal property and contingencies. In addition, the document should include all clauses that the parties may require later. As a buyer, you must ensure that all the clauses are present. If a clause is not included, it must be renegotiated before the sale. All clauses should be written clearly, and concisely and should not be wordy and lengthy. Any clause or section deemed unnecessary, or any redundant provision should be omitted from the document.

Buyer beware

The buyer beware, also referred to as “caveat emptor,” is an internationally accepted principle of law that a party to a transaction has the right to exact information regarding the quality of the goods/services being sold. Therefore, it is your right in a real estate purchase agreement to ask for any clarification and should be able to change any one of the terms or conditions included in the agreement as per your opinion or choice. The buyer beware section is usually very important when buying a property in states such as Alabama, Arkansas, Colorado, and Florida. Missouri, Indiana, Massachusetts, Montana, Virginia, New Jersey, Wyoming, and West Virginia do not have laws governing the disclosure of property defects.

Conclusion

A real estate purchase agreement should be drafted and negotiated carefully to protect the interests of the buyer and seller. The document is considered a legally binding contract, so it must contain all relevant information for the buyer and seller. However, the final agreement should be a fair and equitable one. When drafting a real estate purchase agreement, the parties should consider all the relevant laws, regulations, and procedures applicable to property sales in their local jurisdiction. In addition, both parties must understand all the terms and conditions of the agreement before signing it.