A real estate purchase agreement (a.k.a. purchase and sale agreement) is used to lay out all the important terms of a transaction between a buyer and seller of real estate. LegalNature’s real estate purchase agreement contains everything you need to create a strong contract that is customized according to the wishes of the parties. In addition to the standard provisions included in most real estate purchase agreements, this agreement allows you to customize the following terms:
First begin by completing the information for each party, including the names, party type, and address. If the seller acquired the property being sold during marriage, then you will need to select the option for a married couple as the seller type (unless you’re now divorced). This simply requires the seller's spouse to sign this agreement to show that the spouse won't make any claim to the property in the future.
The buyer contingencies are specific conditions that the buyer requires to occur before the buyer will agree to close the deal. If a contingency is not fulfilled, then the buyer will have the right to cancel the agreement and receive a refund of the earnest money and any other deposits made.
However, the buyer always has the option to waive a contingency later on if it is no longer needed. Although each contingency can be negotiated between the parties, the contingency options included with this agreement are all rather typical. The contingency options included are financing, appraisal, inspection, and property sale contingencies, each explained below.
For the financing contingency, you will be given options to select whether the buyer will receive financing for the property through a third-party lender, a mortgage assumption, seller financing, an all-cash transaction, or another form. This contingency states that the buyer must first obtain sufficient financing prior to closing. Thus, if the buyer is unable to obtain the necessary funds, the buyer will have the right to back out of the deal and receive a refund of the earnest money and any other deposits.
"Third-party lender" means financing by a traditional lending institution. "Mortgage assumption" means that the buyer will assume the seller's loan obligations by agreeing to pay for the outstanding loans on the property. "Seller financing" means that the seller and buyer will create a private loan agreement between themselves. "All cash" means the buyer will fund the transaction itself, without financing. Note here that the funds do not have to actually be in cash form, as electronic wire transfers are usually accepted. Select "Other" to describe a different type of financing.
The appraisal contingency says that the property must be appraised at a value equal to or greater than the purchase price. If the appraisal is for less than the purchase price, the buyer will have the option of either canceling the agreement and receiving a refund of the earnest money or renegotiating the purchase price. The agreement requires the appraisal to be carried out within 10 business days of signing this agreement. You will have the option of specifying which party will be required to pay for and obtain the appraisal.
Similarly, the inspection contingency says that a professional must inspect the property prior to closing. If the inspection isn't conducted by that time, or if the inspection occurs but reveals the existence of a material defect, then the buyer will have the right to either cancel the agreement and receive a refund of the earnest money or require the seller to repair the defect. The agreement requires the inspection to be carried out within 10 business days of signing this agreement.
The last contingency option requires that the buyer sell its home or another property prior to closing. If the sale of the buyer's property doesn't occur, the buyer may choose to cancel the agreement and receive a refund of the earnest money.
Another important term you will specify is whether or not the property is in need of any repairs. This includes anything on the property that has structural or mechanical problems or is in disrepair, including any problems with the foundation, walls, support structures, roof, water and electrical systems, plumbing, or mechanical systems. Unless the buyer agrees otherwise, the seller will be required to repair these items. However, as usual, the buyer can always waive the requirement for the seller to make the repairs.
State and federal law may require that the seller of real estate make certain disclosures. For instance, for all properties built before 1978, federal law requires that the sellers and buyers of real estate sign a "Disclosure of Information on Lead-Based Paint," which is included for you in the agreement. Sellers should keep the signed copy of the "Disclosure of Information on Lead-Based Paint" for at least three years. State or local law may require other disclosures, such as a flood area warning or radon gas warning.
To execute the agreement, the parties must simply sign and date it in the presence of a notary public or two witnesses. Most states just require one notary to act as a witness. However, two witnesses are always required to sign mortgage agreements in Connecticut, Florida, Louisiana, and South Carolina. These states also allow a notary to sign in the place of one of the witnesses.
Note, in EVERY state, lenders can still choose to require two witnesses to sign. The main requirements for witnesses are that they are 18 years or older and are disinterested from the transaction, meaning they have no stake in the outcome and are not related to either of the parties by blood.
After your agreement has been signed and witnessed, distribute the final copies of the agreement to the buyer and seller. Be sure to refer to the agreement throughout the closing process to ensure that each party is performing accordingly.
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