Free Real Estate Purchase Agreement Template
A real estate purchase agreement is a binding agreement where the seller and the buyer agree and commit to the terms of the sale of a piece of real property. This includes the specifics of the property, the purchase price, the downpayment, the payment terms and other terms and contingencies that the parties agree on.
A simple purchase agreement for real estate will identify the following basic elements:
- Buyer and seller details: The full names and contact information of the parties to the contract.
- Property details: The address of the property, as well as a legal description of the land to accurately identify the location of the property. A legal description of land will commonly be in metes and bounds and prepared by a licensed surveyor.
- Purchase price: The total price to be paid for the property, including any deposits or adjustments.
- Representations and warranties: The seller will make certain statements of facts and promises regarding the property that the buyer will rely upon in entering the transaction.
- Financing: Will the buyer be financing his or her purchase through third-party financing or seller financing, or will the buyer assume the seller’s existing mortgage?
- Contingencies: Any actions or conditions that must occur for the contract to happen.
- Title insurance: One party is usually responsible for obtaining title insurance in the name of the buyer. Title insurance is a form of insurance that covers loss of value in the property due to future discoveries of defects in title.
- Closing and possession dates: When will the legal transfer occur and when will the buyer be entitled to take possession of the property?
- Lead-based paint disclosure: A mandatory disclosure for homes built before 1978. A lead-based paint disclosure provides buyers certain information about lead hazards in the home, providing opportunity for an independent lead inspection.
Real Estate Financing
Rarely will a buyer pay for an entire property in cash—the buyer typically needs additional financing to pay the full purchase price of the property. Which type of financing is chosen depends on the financial position of both parties (the buyer and seller). There are four ways to finance the purchase of a property in a real estate purchase contract:
- Third-party financing. A bank or lending institution provides a loan or mortgage to a buyer which the buyer must pay back over time, with interest. This is the most common way to purchase a property—the approval depends on the buyer’s credit rating, job history, and current financial situation.
- Seller financing. The seller and buyer create a private loan contract. The buyer pays back the loan over time, with interest. 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 predetermined amount in intervals until the agreed-upon price has been paid in full.
- Assumption of mortgage. The buyer agrees to take responsibility for the seller’s mortgage, thereby becoming liable to repay the seller’s loan.
- All-cash financing. When the buyer will finance the deal themselves by purchasing the residential property in full using their own funds, and will not require a loan. The funds do not need to be in the form of cash, as electronic wire transfers are normally accepted.
The financing arrangement may also be documented in a Loan Agreement, Promissory Note, Mortgage Agreement, or Deed of Trust.
When Do I Need a Real Estate Purchase Contract?
You should use this agreement if you:
- are a potential buyer or seller of residential property
- want to define the legal rights of each party to the sale
- outline each party’s’ respective duties before the transfer of legal title.
This agreement can be used for any residential property purchase or sale, as long as the construction of the home is completed before the closing date of the contract.
How to Handle Real Estate Purchase Agreement Disputes
Mediation is a less formal and more cost-effective way to resolve disputes instead of both parties going to court. It allows both parties to discuss their issues candidly and bring them out in the open. Mediation is generally non-binding, meaning either party can walk away without a resolution. The parties are free to decide whether any disputes that are not resolved by mediation should go to arbitration.
In arbitration, each party will offer evidence and/or testimonies to plead their cases. Once both parties have been heard the arbiter will rule on the case. Unlike mediation, where a resolution is only reached if all sides agree, arbitration can rule in favor of either party. Additionally, when arbitration is agreed on, the decision of the arbitrator will be binding for both parties.
Signing and Dispute Information in a Real Estate Purchase Agreement
No, this document does not have to be signed by a notary public since it does not get filed with the County Recorder’s Office. The purchase agreement only serves as a written record of a contractual relationship between the seller and the buyer and does not actually transfer the title or ownership of the property from the seller to the buyer.
No, witnesses are not required, but it is advisable for both parties to insist on having witnesses present who can, if a dispute arises at a later date, testify that the parties did in fact freely sign the contract.
Mediation is a way to resolve disputes in a less formal, less rigid, and generally more cost-effective manner than going to court. It allows both sides to talk candidly about their issues and bring them to the forefront.
Mediation is generally non-binding to the parties, meaning either party can walk away without a resolution if they feel the process is being handled poorly. That being said, the cost savings of mediation and the opportunity for alternate solutions (as opposed to a win/lose situation in litigation) make the process very appealing for small disputes.
Arbitration is an alternative way of resolving disputes outside of court. The disputing parties will offer testimonies and evidence to plead their cases and then the arbiter rules on the case. Unlike mediation, where a resolution is only reached if all sides agree, arbitration can rule in favor of either party.
The parties are free to decide whether or not disputes that are not resolved by mediation should go to arbitration. If arbitration is agreed upon by the parties, the decision of the arbitrator will be binding on both parties.