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What’s in a Purchase Agreement?

Dec 31 2019

You found a home you want to buy, so you put in an offer and it was accepted. Wahoo! Now you just have to put your John Hancock on a form called the purchase agreement and you’ll be ready to close on your new digs. 

But what exactly are you signing? Also called an agreement of sale or a sale contract, this legally-binding document is typically drawn up by a real estate agent. It details the terms of the sale, including the price, a description of the property and which party is responsible for what.

The document can be 10 pages long, and its contents will vary, depending on things like which state the property is located in and what exactly you’re purchasing. For example, if you’re buying the wrought iron furniture that already fits so nicely the deck, that will be specified in the purchase agreement.

While we strongly recommend enlisting a real estate agent and/or attorney to help you fill out these papers, the standard inclusions are not terribly complicated, though the jargon may look it at first. Below are some examples of what you will see.

  • Property: This section notes the street address and legal description of the home (usually found on the deed). In rural areas not served by public water and sewer systems, the well and the septic system must be described here.
  • Sales price: The price specifies what you agree to pay for the property. It covers the home itself and its “fixtures,” which are anything permanently attached to the building or land, like ceiling fans and fences.
  • Escrow: This will specify the amount of earnest money you’re putting into escrow to show that you’re a serious buyer. If the sale works out, then your deposit will be put toward the purchase price. If it falls through, you’ll get your money back.
  • Expenses: Here you’ll find a detailed explanation of who needs to pay what. The seller, for example, may cover debts attached to the deed, along with the fees associated with transferring the deed and title. The buyer, meanwhile, will pay the fees required to take out a mortgage.
  • Remedies and Addenda: Throughout the document you will also see contingencies for what happens if things don’t go according to plan. For example, there may be a Third Party Financing Condition Addendum, which requires the buyer to notify the seller if their loan falls through. Similarly, it will detail your possible legal recourse if the seller defaults on their end of the bargain.
  • Closing: The purchase agreement will also state a specific closing date and what will be transferred at it, such as the remaining funds from the buyer in exchange for the deed and other documents related to the home.

 

Buying a house with your buds? Check out our post “Flocking Together: Homebuying Trends Among Friends.”

Have more questions or want to talk to a home expert? Download the Keep Home™ app to access our free Home Expert tool.

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