What Is A Purchase Agreement In Real Estate?
When you're buying or selling a home, the purchase agreement is one of the most important documents you'll sign. This legal agreement spells out the agreed-upon terms between the buyer and seller, including price, date of sale, and contingencies. Signing a purchase agreement effectively puts both parties "under contract" and begins the process of transferring ownership of the property. Be sure to study these topics to prepare for your real estate exam.
What’s Included In A House Purchase Agreement?
A typical purchase agreement will include the following:
- The names of the buyer and seller
- A description of the property being sold, including square footage and any special features or amenities
- The purchase price of the home
- The date of sale and any contingencies leading up to that date
- Signatures from both parties agreeing to the terms of the sale
As you can see, a purchase agreement is a fairly straightforward document. However, it's important to understand all the details.
For example, many purchase agreements include a loan contingency, which gives the buyer a set amount of time to secure financing for the home. If they're unable to do so, they may back out of the sale without penalty.
Who Prepares The Purchase Agreement?
In most cases, the real estate agent representing the buyer will prepare the first draft of the purchase agreement. From there, it will be reviewed by the seller's agent and any necessary changes will be made. Once both parties agree, the contract will be signed and sent to escrow.
Contingencies Of A Purchasing Agreement
Contingencies are conditions that must be met in order for the sale to go through. If any of the contingencies are not met, either party may back out of the sale without penalty.
The most common contingencies include:
Loan contingency: The buyer has a set amount of time to secure financing for the home. If they're unable to do so, they may back out of the sale without penalty.
Home inspection contingency: The buyer has a set amount of time to have the home inspected by a professional. If they're not satisfied with the results of the inspection, they may back out of the sale without penalty.
Appraisal contingency: The buyer has a set amount of time to have the home appraised by a professional. If the appraisal comes in below the purchase price, they may back out of the sale without penalty.
Financing: As mentioned above, this contingency allows the buyer to back out of the sale if they're unable to secure financing within a set period of time.
Sale of Another Property: If the buyer is selling another home in order to purchase the new one, they may include a contingency that states the sale is contingent on the completion of that transaction.
As you can see, there are a few different contingencies that may be included in your purchase agreement. It's important to understand what a contingency is before you take your real estate exam.
A purchase agreement is a binding legal document that outlines the key details of the home sale transaction. This includes the names of the buyer and seller, a description of the property being sold, the purchase price, and any contingencies leading up to the date of sale. Be sure to study this topic before you take your real estate exam. Good luck with your educational endeavors!
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