Our real estate purchase agreement contains everything you need to complete a strong contract for the purchase and sale of a piece of property. In addition to the standard provisions, this agreement allows you to customize the following terms:
Begin by entering the information for each party, including the names, party type, and addresses. If the seller acquired the property being sold during marriage, then indicate the sellers are a married couple. This simply requires the seller's spouse to sign this agreement to show that the spouse will not make any claim to the property in the future.
Buyer contingencies are conditions that the buyer requires to occur before the buyer will close the deal. If a contingency is not satisfied, the buyer will be entitled 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. The contingencies can be negotiated between the parties; however, the contingency options included in LegalNature's agreement are all rather typical. The included contingency options are financing, appraisal, inspection, and property sale contingencies, and are each explained below.
For the financing contingency, indicate 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.
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, then the buyer will have the option of either cancelling 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 should specify 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 is not 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. LegalNature's agreement requires the inspection to be carried out within 10 business days of signing the agreement.
The last contingency option requires that the buyer sells the home or another property prior to closing. If the sale of the buyer's property does not occur, then 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.
To execute the agreement, the parties simply sign and date it in the presence of a notary or 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 allow a notary to sign in the place of one of the witnesses. Note, in ANY state, lenders can still choose to require two witnesses to sign. The main requirements for witnesses are that they are 18 years of age or older and are disinterested from the transaction, meaning that they have no stake in the outcome and are not related to either of the parties by blood.
For properties built before 1978 (i.e. pre-1978 property), 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. Sellers should keep the signed copy of the "Disclosure of Information on Lead-Based Paint" for at least three years.
A legal description is a specific way of identifying a particular plot of real estate and the legal geographic location of its boundaries. You can find the legal description on the property's current or previously recorded deeds, your County Register or Recorder of Deeds Office (often online), property tax assessments, websites such as Zillow.com, your mortgage contract, or your land title.
The legal description is NOT the same as a property’s street address, as this may change from time to time. However, it is still recommended to include the street address on a deed, for sake of clarity. Depending on the type of property, the legal description might be in the form of a simple lot and block reference, or it may be in a survey format giving a detailed measurement of the plot. It is crucial to get the legal description correct to complete a sale or transfer.
Closing is the final settlement of all the terms required in a real estate purchase agreement. This includes all contingency provisions that both parties have included, the documents that need to be exchanged, and any sums of money that need to be paid.
In terms of a real estate purchase agreement, a contingency is a contractual requirement that must be completed in order for the purchase to be completed. Contingencies are added as terms to the written purchase contract that both the buyer and seller agree to.
Common contingencies include the following:
In the context of real estate, an encroachment is a type of encumbrance characterized by a physical intrusion on a property owner's land. An example of an encroachment is when a person constructs a structure that extends beyond the boundaries of his or her property and onto, over, or underneath the neighboring property. Here, the person is said to be "encroaching" on the neighbor's property.
Escrow is an arrangement where a third party holds funds and manages payments. Escrow arrangements are normally enforced when large sums of money change hands, such as real estate purchases. The third party will safeguard funds until the terms of a contract are fulfilled. This way, the two contracting parties are kept safe without needing to transfer money to each other.
After reviewing the document, the parties simply sign and date it in the presence of a notary or witnesses. Most states just require one notary to act as a witness. However, two witnesses are always required to sign real estate purchase agreements in Connecticut, Florida, Louisiana, and South Carolina. These states allow a notary to sign in the place of one of the witnesses. Note, in ANY state, lenders can still choose to require two witnesses to sign. The main requirements for witnesses are that they are 18 years old 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.
Note, if the seller acquired the property during marriage and the spouse is not already named as a seller in the agreement, then that seller's spouse must sign the spousal acknowledgment section where indicated. This section certifies to the buyer that the spouse will not make any claim to the property in the future.
Hire an escrow agent to act as a neutral third party to help the buyer and seller safely exchange funds, sign documents, and fulfill their obligations.
The buyer and seller will each need to fulfill their obligations under the purchase agreement and meet any other state law requirements. This could include some or all of the following items:
At closing, the parties will transfer funds and sign the title and any remaining escrow documents. The title company should then record the deed at your County Recorder's office and notify all interested parties when this is completed.
Lastly, the seller will need to move out of the property by the agreed date. This could be as early as the closing date, so the seller should plan this step well in advance.