Purchase Agreement
Definition and meaning of Purchase Agreement in real estate.
A purchase agreement is a legally binding contract between a buyer and a seller that outlines the terms, conditions, and price of a real estate transaction.
In more detail
This document is drafted when a buyer makes an offer on a home and becomes a binding contract once both parties sign it. It includes essential details such as the purchase price, earnest money deposit, proposed closing date, and list of included fixtures. It also contains contingencies, which are conditions that must be met for the transaction to proceed.
Although purchase agreements and custom closing procedures vary by state, the contract protects both parties by detailing what happens if either side defaults.
Key facts
| Category | Buying & Selling |
|---|---|
| Legal status | Binding contract once signed |
| Key components | Price, contingencies, and closing date |
| Protection | Protects deposits via escrow rules |
After negotiating the price of a house, the buyer and seller sign a purchase agreement specifying that the sale depends on the buyer obtaining financing within a typical thirty-day period.
Frequently asked questions
Can a buyer back out of a purchase agreement?
Yes, a buyer can back out without penalty if a contingency in the agreement, such as a financing or inspection contingency, is not met.
What happens if a seller breaches a purchase agreement?
If a seller breaches the agreement, the buyer may sue for specific performance to force the sale, or sue for damages and the return of their earnest money.