WHAT DETAILS SHOULD A REAL ESTATE PURCHASE AGREEMENT COVER?

When buying or selling a property, it’s typically necessary to enter into a real estate purchase agreement, also known as a real estate purchase contract. This is essentially a contract a buyer and seller enter into establishing essential terms of the transaction, such as the cost of the property.

That said, how much a buyer is paying for a property isn’t the only detail a real estate purchase agreement should cover. It’s usually necessary to officially address certain other factors via a contract.

This overview will cover some of the more noteworthy examples of essential real estate purchase agreement components. Just be aware that this isn’t necessarily an exhaustive list. Depending on the circumstances, you may want to ensure your contract addresses other details not listed here. 

(Tip: To make the process of drafting a real estate purchase agreement easier, consider using a real estate purchase agreement template. While you may need to make some adjustments or add certain details based on your current needs and situation, a template can at least help you get started, allowing you to save a lot of time.)

A strong real estate purchase agreement will include a general description of the property. This should be a legal description that describes the size and location of the property based on official survey maps. If the property has any easements, this should be mentioned as well.

This component of the real estate purchase agreement will also typically describe the condition of the property. This is necessary to ensure there’s an official record of the new buyer accepting the property in its given condition. Additionally, in some instances, a real estate purchase agreement will name any fixtures and/or appliances that are included with the property.

It’s often agreed upon that, before closing can proceed, the buyer of a property, seller of the property, or both must take certain actions or meet certain conditions. For example, if a property has a mold problem, a seller may be required to remediate it before closing. These types of contingencies should be clearly listed in a real estate purchase contract.

In most circumstances, it’s important for a real estate purchase agreement to explain how a buyer is financing their purchase of the property. 

An agreement may also address other significant financial details. For example, various costs may contribute to the overall closing cost. Thus, it’s not uncommon for real estate purchases contracts to feature itemized lists of closing costs, identifying which parties are responsible for covering them.

Sometimes a property buyer will later discover title defects that may not have been initially aware of. These can include unrecorded easements, conflicting wills, building code violations, and similar issues.

These defects can negatively impact a property’s value. As such, it’s important that property buyers and their lenders be financially protected from such potential losses in value.

Title insurance offers this protection. Although it protects the buyer and lenders, and a buyer certainly may purchase it, sometimes a seller will secure title insurance on the buyer’s behalf. Regardless, information about the title insurance should be included in the real estate purchase agreement.

Although closing dates may change, a real estate purchase agreement should at least name the prospective closing date. This is when ownership of the property will be officially transferred from the seller to the buyer.

Again, this isn’t a full list, as the specifics of a given transaction can make it necessary for a real estate purchase contract to include other details. These are merely the basics. However, they do generally cover what most real estate purchase agreements consist of.