A real estate purchase agreement is a form used by real estate agents, individuals and attorneys when a buyer decides to buy a property. Generally, a purchase agreement benefits the seller, but with some changes, it could also benefit the buyer. A savvy buyer will make sure the purchase agreement allows them to break the contract for certain exceptions.
Section 1 of the purchase agreement contains the names of the buyer(s) and the seller(s), the address and legal description of the property and items that are included and not included in the purchase price. Generally, appliances are included in the purchase price. If one or more appliances are not included, they should be listed. For example, most people take the washer and dryer when they move, but leave the stove and refrigerator.
Section 2 contains the purchase price, how much was received as good faith money (deposits received), and the total amount of financing the buyer must get. These amounts do not include extras, such as closing costs and fees for inspections.
Section 3 tells the seller whether the buyer is paying cash or getting financing and what type of financing the buyer is applying for. This is important because certain types of financing, such as FHA and VA financing, might take longer to go through because of the additional requirements and inspections for financing.
Sections 4 and 5 include the closing date and closing procedure, including some of each party’s expected closing costs, such as a termite inspection, taxes, recording fees and other costs.
Sections 6 through 9 have to do with the condition of the property, the seller’s disclosures and the seller’s duties to the buyer regarding inspections, maintenance and repair. Section 10 discusses the seller’s responsibility to provide marketable title.
The rest of the contract provides the legalities of the contract and the addenda, if any, and the signatures for the buyer(s) and the seller(s).
In most cases, your good faith money is non-refundable. However, you can provide certain exceptions. If you or the buyer cannot meet those exceptions, you can break the contract and get your money back. Common exceptions include:
Your ability to obtain financing. If you get financing, but do not like the terms, you cannot back out of the contract. You can only back out if a mortgage broker declines your application.
Home defects. If you are buying a house that has been lived in, it is bound to have some defects. However, some defects are costly and you cannot be expected to buy a property for full price of those defects exist.
You have three choices: You can back out of the contract; you can ask the seller to make certain repairs; or you can agree to cure the defects if the buyer lowers the price.
Before you ask the buyer to lower the price, be sure to get estimates on repairing the defects. You cannot find a defect that costs $7,000 and ask the seller to drop the price by $10,000. Actually, you could, but the seller would most likely decline. Keeping requests reasonable is the best way to keep the seller from breaking the contract.