A purchase agreement is an essential step in the real estate process and outlines the prices and terms for the transaction. Every element of the sale is covered. The goal of a purchase contract, or agreement, is to protect both the buyer and seller and to make sure that all expectations are clear. Although purchase agreements can vary, there are certain primary components that should be included.
Property address and description. First and foremost, a purchase agreement must outline the property details such as the exact address and a clear legal description. Additionally, the identity of the seller and buyer should be included.
The mutually agreed upon sale price and terms of the sale for the home. This is the price that was offered by the buyer and accepted by the seller. The contract should also include how the buyer will be making the purchase such as paying in full with cash or down payment with a new mortgage.
Earnest money deposit amount. Earnest money is used to confirm the contract. In most cases, this money will go toward the eventual down payment. Typically, buyers can expect to pay at least $1000. Some sellers may choose to contingencies that if the sale does not go through for financial reasons, this money will be forfeited by the buyer. Likewise, contingencies can be made by buyers that the money is fully refundable if the seller does not meet the conditions of the sale.
Date of the final walk-through. The date of the final walk-through should be included on the purchase contract. This is the final inspection of the home by the buyers prior to signing all of the documents which make the sale official.
Date of the closing and closing costs. The date of the closing should be included on the purchase contract. The closing date marks the transfer of the property’s title from the seller to the buyer. Closing costs, and who should pay them, should also be included. Often, the buyer pays the entirety of closing costs, although sellers may agree to pay or split costs. The division of expenses should be clearly stated in the contract.
Home buyer’s contingencies (if any). A contingency is a provision that is attached to an offer to purchase that gives parties the right to back out of a contract under certain circumstances that are negotiated between the buyer and seller. Some typical contingencies are appraisal, home inspection, or home sale contingencies.