Home Buying Purchase Contract
A binding legal agreement that outlines key details of the home sale transaction, it may also be referred to as a real estate sales contract, home purchase agreement, real estate purchase contract or house purchase agreement.
home buying purchase contract
In effect, when an offer is made to purchase a new home, a buyer will propose conditions for the sale, and spell out important financial details such as their offer price. A home seller will then have the opportunity to accept, reject or negotiate the terms of this offer.
This contract signals the intent of all parties to engage in a home sale transaction and explains which conditions must be met for the sale to close and ownership of the property to transfer to the new buyer.
Think of earnest money as a good-faith deposit from the buyer to the seller that shows that the buyer is serious about their offer to purchase a home. Except in the case that certain contingencies are met, a buyer will lose this earnest money deposit if they choose to back out of this transaction.
A purchase and sale agreement is a contract including the terms and conditions for selling a property in exchange for a specific price. After it is signed, an earnest money deposit is paid by the buyer and is non-refundable if their contingencies are met.
Buying a house can be a big deal, and not just because of the complexities of the home buying process. While there are several legal components involved when entering a real estate transaction, signing a purchasing agreement is among the most significant.
In real estate, a purchase agreement is a binding contract between a buyer and seller that outlines the details of a home sale transaction. The buyer will propose the conditions of the contract, including their offer price, which the seller will then agree to, reject or negotiate.
Negotiations may go back and forth between the buyer and the seller before both parties are satisfied. Once both parties approve the terms and have signed the purchase agreement, they're considered to be "under contract."
Typically, the buyer's agent writes up the purchase agreement. However, unless they are legally licensed to practice law, real estate agents generally can't create their own legal contracts. Instead, firms will often use standardized form contracts that allow agents to fill in the blanks with the specifics of the sale.
While many parts of your contract are fairly straightforward, like what price you'll pay and when closing will happen, other parts of the purchase agreement might be a little confusing, especially for first-time home buyers. Make sure you fully understand the entire purchase agreement before you sign it.
Your real estate purchase agreement will include information about how the home will be paid for. If the buyer isn't paying in cash, they'll need some sort of financing (like a mortgage loan) to buy the home, the specifics of which will be written out in the contract.
For example, the contract will specify if the buyer is obtaining a mortgage to purchase the property, or if they're using an alternative, such as assuming the current mortgage on the property. Another option is seller financing, where the buyer makes payments to the seller rather than a traditional mortgage lender.
Earnest money, sometimes also referred to as a good faith deposit, shows that a buyer is serious about buying the home. Sellers don't want to waste their time; they want to know that a buyer is going to stick with the contract through closing. The earnest money deposit helps give them that confidence.
If, between the time of signing the purchase agreement and closing on the home, the buyer decides they want to back out for a reason that isn't stipulated in the contract, they lose their earnest money, and the seller gets to pocket it. However, a buyer can get their earnest money back if they back out due to a reason stipulated in the contract.
There are many different types of contingencies that can be included in real estate contracts on both the buyer's and seller's side, and it's important to understand any contingencies that are included in your purchase agreement.
The purchase contract is typically prepared and written by a real estate agent, not a buyer or a seller. As discussed above, a purchase agreement should contain buyer and seller information, a legal description of the property, closing dates, earnest money deposit amounts, contingencies and other important information for the sale.
Even if you aren't a legal expert, it's still important to understand the legal and contractual aspects of your home sale or purchase. Buying or selling a home is a big deal, and you can avoid headaches by making sure the deal you're getting into is a good one.
A purchase contract is an agreement between the buyer and seller on the price, location and closing date of a home purchase. There are often many contingencies in the contract, which can protect both parties from harm if complications arise before the closing date.
The contract should spell out the terms of the purchase and allow each party a chance to nullify it under certain circumstances. For that reason, the language in the contract should be as clear as possible to avoid a protracted battle between real estate professionals and lawyers when one party wants to dissolve the deal.
Kate Van Pelt is a writer and editor based in Oregon, with a background in home improvement, marketing, and finance. She has owned, remodeled, and rented properties and has developed a thorough understanding of effective home-buying tips and trends along the way.
Once you sign the purchase agreement, it becomes a legally binding contract. Both parties commit to the sale and may only negotiate or cancel the sale without repercussions if the agreed-upon contingencies and deadlines are unmet.
If the appraisal values a home under the contract value, the buyer can renegotiate their offer or leave the deal. The seller may have to cover the difference between the home and loan values, or the sale may fail altogether.
With a home sale contingency, the buyer agrees to purchase your home if, and only if, they sell their house first. While this may seem like a rational request from a buyer, it is a particularly risky contingency for sellers.
Buyers may also add custom contingencies to the purchase agreement. For instance, one Washington homebuyer included a contingency that a feng shui specialist must evaluate the property to verify if the property had the right energy.
Down payment: Most buyers require a mortgage loan to afford a home purchase, but the down payment is the percentage of the purchase a buyer pays up-front and out-of-pocket. A larger down payment often indicates lower risk to a seller. Should the buyer encounter any last-minute financing snags, the seller has good reason to assume the buyer can cover the shortfall.
Reviewing and understanding the purchase contract form ahead of time can also help you strengthen your negotiating position, protect yourself from incurring unnecessary costs or problems, and gain a better understanding of what you will need to do to conclude the sale.
To assist you and other homebuyers, we created a comprehensive home buying guide that walks you through each step in the buying process, with personalized guidelines and worksheets that will help you find a home well-suited to your needs.
Borrowing money to purchase a home is a complex process. While working through the home buying process you will need to at least involve a mortgage broker/bank/lender, Title Company and an appraisal company. Buying a home is the biggest purchase you will make in your lifetime.
A formal loan application is required once a consumer finds the home they would like to purchase. The consumer's bank, credit union, mortgage lender or mortgage broker may ask consumers if they would like to lock the rate offered at the time of application or "let it float". Consumers choosing to lock the rate means that the interest rate quoted will remain the same until the loan is closed; whereas a floating rate may change (higher or lower) as the interest rate in the market changes between the date of application and date of closing.
Before signing any legal documents or contracts an attorney should be consulted to review the documents. Consult an attorney throughout the home buying process to ensure all deadlines and requirements are met in order to reach the final purchase stage.
After finding a home that fits your budget and other wants/needs, make an offer on the property. The offer will include the amount of money the you want to pay for the property and other information such as property inspections. An offer is a legally binding contract and an attorney should be consulted prior to submitting into any contract.
Once the offer has been accepted by the buyer, you will have to sign a contract, also known as the purchase and sale agreement. A purchase & sale agreement (P&S) is a legal document prepared and agreed to by attorneys representing both the buyer and seller in the home purchase transaction. The P&S is signed by both the buyer and seller, and will include final sale price and all terms of the purchase. The P&S is a legally binding document and an attorney should be consulted prior to entering into any contract.
Coordinate your closing date with the lenders settlement agent, the seller, and attorneys. Closing documents will be signed when all parties agree to meet and the sign legally binding documents to purchase the home.
To protect yourself, pay careful attention to the contingencies outlined in the agreement, and especially to the deadlines attached to each. For example, you might be required to complete a home inspection (and ask for repairs/credits) within 14 days after the contract is assigned. A financing contingency might need to be met within 30 days to get final loan approval. If you need more time to complete a contingent task, your real estate agent will likely need to file a contract addendum that the seller must approve to get your extension. 041b061a72