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Using a state-specific template for a Real Estate Purchase Agreement is crucial because it ensures legal compliance with the specific regulations and nuances of the state.
A real estate purchase agreement is a legally binding document that governs the terms and conditions of the sale of a property. This document sets out the responsibilities of each party as they relate to the purchase of real estate. This document is sometimes called a real estate contract, home purchase agreement, house purchase agreement, or a real estate purchase contract.
Real estate laws can vary significantly from one state to another. Some states have specific requirements and disclosures that must be included in a real estate purchase agreement.
Create your real estate purchase agreement using our state-specific templates to ensure legal compliance with your local regulations and nuances of the state.
State laws will typically govern what needs to appear on the purchase agreements. As such, it’s vital that you check your local regulations before signing a real estate purchase agreement. Some common disclosures that your state may require include:
These are specific conditions that must be met before the agreement is considered enforceable by a court of law. These can include inspections, appraisals, financing, and other title contingencies.
This is considered a good faith deposit demonstrating the buyer’s ability and desire to purchase the property. This is usually deposited into an escrow account until the mortgage note closes.
Some states may have different rules on how earnest money is handled and refunded.
| State | Earnest Money Deposit Regulations | Custodian |
| California | No specific limit. Typically held by a neutral third party. | Escrow or title company |
| Florida | No statutory limit. Often held in escrow. | Title company |
| Texas | No state-mandated limit. Customarily held in escrow. | Title company or escrow agent |
| New York | No statutory limit. Customarily held in escrow. | Seller’s attorney or real estate broker |
| Pennsylvania | No specific state limit. Often held in escrow. | Title company or seller’s broker |
| Illinois | No statutory limit. Frequently held in escrow. | Title company or attorney |
| Ohio | No statewide limit. Typically held in escrow. | Title company or attorney |
| New Jersey | No set limit in state law. Commonly held in escrow. | Title company or attorney |
| Tennessee | No statutory limit. Typically held in escrow. | Neutral third party |
| Wisconsin | No state-mandated limit. Usually held in escrow. | Title company or real estate broker |
The requirement for notarization of real estate purchase agreements can vary, and it’s essential to consult specific state laws.
Generally, states such as California, Florida, and New York may require notarization for certain real estate documents, but this can depend on the specific circumstances and the terms of the agreement.
Aside from the contract being signed and dated by all parties involved, a number of requirements must appear on all contracts before they’re considered legally valid. These requirements include:
As with any legal contract, there are a few key components that must appear on your real estate purchase agreement. Understanding what should appear on your contract and what these terms mean is essential in a successful transaction.
Bear in mind that there can be more components included based on your specific state or property. However, the basic elements that are standard across all of these purchase agreements include:
If you’re using a real estate purchase agreement template, ensure it’s from a reputable source that includes all of these key components.
You can draft a real estate purchase agreement from scratch or use a template to help get you started. Follow the below steps when drafting your contract to ensure you don’t miss any vital information.
Start by describing the property. This should include your legal land description, which you can get from your local county clerk-recorder office. Apart from this, you should also include other descriptions, such as any furniture or fixtures inside the building, the general condition of the property, and any disclosures required by state law.
You must also include the full names, addresses, and contact details of all parties involved in the transaction. If the agreement is between multiple parties, then all of their details must appear on the contract.
Several sale details need to be defined in your real estate purchase agreement. These include:
There are many different conditions or contingencies that you can include in your agreement. These conditions must be met before the deal’s closing date, or either party can cancel the agreement. One common condition is the buyer being approved for financing or finalizing the sale of another property. Another condition is to require a new land survey or building inspection.
Next, you can add any final details, such as the closing date. Along with the closing date, you should also specify whether the buyer will take occupancy on the closing date or if they’ll temporarily lease the property if the occupation date is different. There’s typically a period between the offer and closing date to allow either party to meet any conditions set forth in the agreement.
When drawing up your agreement, it’s important to mention how conflicts will be resolved if they come up during the transaction. Typical conflict resolution options include mediation or arbitration. Both options involve a neutral third party who oversees the issue until it can be resolved amicably.
When it comes to a real estate purchase agreement, there may be some unfamiliar terms. Let’s take a look at a few of the most common terms and their associated definitions:
This is the deposit that the buyer pays to demonstrate their commitment to the sale. This payment is returned if the sale falls through. If the deal closes, this amount is credited towards the down payment.
The down payment is the amount of money the buyer puts towards the final price to qualify for financing.
When you buy a property, the earnest money is paid to an escrow agent who keeps the money until the deal closes. In most cases, the buyer and seller will split any related escrow costs.
There are annual homeowner costs associated with any property. The buyer and seller decide how these costs will be split once the deal closes. Usually, it’s calculated pro rata based on the closing date.
Once both parties have signed the agreement, they’re bound to the terms set forth therein. This means that either party can enforce the terms of the agreement. However, terminating the deal becomes more tricky.
Contingencies are in place to protect the seller’s interest and provide a legal way for them to terminate an agreement without any risk. If the conditions of the agreement haven’t been met, then either party can terminate the agreement. Follow the below process to terminate your real estate purchase agreement.
Before you start the process of terminating your agreement, you’ll first need to define the reason behind it. This is because there are certain avenues a seller can use to cancel the agreement without legal penalties. These include certain conditions or contingencies not being met or either party breaching the terms of the contract. However, for other reasons, there may be penalties associated.
If the reason why you’re terminating the agreement isn’t clarified in your agreement, and they aren’t related to unmet conditions or contract breaches, it’s wise to consult a lawyer before terminating. A real estate lawyer will be able to assist in minimizing any penalties related to the termination of the agreement. They’ll also be able to advise on the next steps if the process becomes more complex.
With the help of a lawyer, you can then post a notice to all involved parties to terminate the agreement.
