What To Include In A Real Estate Purchase Agreement
When selling or buying real estate it is very important and even required in most places to have properly executed written real estate purchase agreements. A real estate purchase agreement sometimes referred to as a real estate contract property sales or purchase contract is a binding agreement between two or more parties with legal capacities to purchase real property based on legal consideration. It sets out the terms and conditions of the transaction.
Although real estate purchase agreements vary depending on the type and location of the property and on whether they are generic forms or especially drawn by lawyers they need to cover essential elements.
Below are some of the most important items to include in a real estate purchase agreement:
- Full name of the buyers and the sellers Obviously the most important information in the contract identifies who is selling the property and who is purchasing it.
- Legal description of the property The description must be adequate to identify and locate the property.
- Purchase price and method of payment The agreement must state the agreedupon total purchase price as well as the terms to which the buyer is willing to commit. Particulars must be described in detail.
- Deposit amount earnest money The agreement specifies how much is the deposit and holds it typically an escrow officer or an attorney. The deposit is applied to the purchase price at closing. It is also refundable to the buyer if certain conditions of the contract are not met. It may also be forfeited if for reasons not provided in the agreement the buyer backs out of the deal.
- Date of closing and possession At closing the remaining balance is paid and title ownership of the property is conveyed from the seller to the buyer. The seller signs a deed for the buyer or his attorney or other agents to record the transfer of ownership. Normally the closing date is also the date when possession of the property is transferred from the seller to the buyer.
- Costs of closing and who pays for them Closing costs include title insurance transfer taxes brokers commission and other pertinent fees. Sellers often shoulder these costs but both parties may agree to split the costs between them.
- Personal property included in the sale This includes appliances or fixtures that the seller or buyer agreed upon will be included in the sale.
- Mortgage contingency Purchase of the property is contingent upon the buyer getting a loan within a certain period of time after the agreement is signed.
- Buyer inspection of the property The contract provides for specific period of time wherein the buyer must conduct an inspection to determine if there are defects or repairs which the seller needs to fix.
- Attorney review. Both parties are given a short period of time typically three days after the contract has been signed in which both parties attorneys can review the contract.
- Home warranty plans If a plan is to be purchased detailed information should be included in the contract.
- Mediation/Arbitration of disputes Both parties agree to mediate all disputes first before resorting to arbitration.
- Liquidated damages The contract may limit the damages awarded to the seller in case the buyer breaches the contract.
- Attorney fees The contract may state that the prevailing party in an arbitration is entitled to attorney fees provided mediation proved futile.
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