Real Estate Purchase Agreement
A Real Estate Purchase Agreement is also known as:
- Agreement to Purchase Real Estate
- Real Estate Purchase Contract
- Residential Real Estate Purchase Agreement
What is a Real Estate Purchase Agreement?
A Real Estate Purchase Agreement is a contract used to outline the terms of a residential property deal between a buyer and a seller. It may only be used for residential properties where construction has been completed.
Who Needs a Real Estate Purchase Agreement?
Some common reasons for using a Real Estate Purchase Agreement include:
- A seller wishes to conduct a private sale
- A seller will be financing the buyer for the purchase
- The transaction will take place between family members
You may use a Real Estate Purchase Agreement for any type of residential property purchase or sale, as long as the home has either been previously owned, or construction will be finished prior to the closing date on the contract.
What is Included in a Real Estate Purchase Agreement?
A real estate purchase contract includes information such as:
- Buyer and seller details (you may have multiple buyers or sellers)
- Property details
- Pricing and financing
- Closing and possession dates
- Conflict resolution
- and, an option to terminate
By using LawDepot's Real Estate Purchase Agreement, you can customize every aspect of your contract to suit your specific situation and property.
Financing in a Real Estate Purchase Agreement:
There are four ways to finance the purchase of a home in a real estate purchase contract. Which you choose to use depends on both the financial positions of the buyer and seller. Your options include:
Third Party Financing: This is when a bank or other lending institution provides a loan to the buyer which must be paid back over time. This is the most common way to purchase a new home, but approval depends on the buyer's credit rating, job history, and current financial situation.
Seller Financing: Sometimes, a seller will provide financing to a buyer who is unable to obtain a loan from a financial institution. This is often the case when a seller has paid off their mortgage, and a buyer simply pays them a pre-determined amount in intervals until the agreed upon price has been paid in full.
Assumption: Assumption is when a buyer assumes, or takes over, the seller's mortgage. This means that the home loan transfers to their name, and they take financial responsibility for the remainder of the mortgage. Assumption often requires that the buyer is qualified to take over the loan under the lender's guidelines.
No Financing: No financing is required when a buyer will be purchasing the residential property in full using their own funds, and will not require a loan.
Other financial terms in your Real Estate Purchase Agreement:
What is Earnest Money? Earnest money is the deposit which a buyer puts down to show their interest and seriousness in purchasing the residential property. If the contract is fulfilled, the amount is credited to the purchase price. If the sale falls through, the money is given back to the buyer.
What is Escrow? When you purchase a property, it is held by a third-party until the closing or possession date. It keeps the property, and any funds, from changing hands until all aspects of the agreement are met, such as home inspections, insurance information, and financing.
What is an Option to Terminate?
An option to terminate allows the buyer to end the Real Estate Purchase Agreement prior to closing the sale, by providing written notice to the seller. You may either include a term in your contract allowing the buyer to have an option to terminate, or you may rely on your state's real estate laws to protect the buyer where needed.
If a buyer requests an option to terminate, the seller may request a fee for doing so. It is up to the buyer and seller to decide if that amount will be credited to the purchase price once the sale has been confirmed.
Forms Related to a Real Estate Purchase Agreement:
Frequently Asked Questions:
Real Estate Purchase Agreement FAQ