A purchase agreement contains the price, terms and requirements for a real estate sale. The goal is to protect both buyer and seller.
If everything in the agreement is in order, the transfer of property should go smoothly. However, if one party defaults, the other party may initiate litigation.
Basic elements
Each party to the contract must be of legal age and competency. The purchase agreement will provide the legal address of the property to be sold. Next is the offered price and acceptance. The buyer must also explain the payment method; for example, a mortgage beginning with a cash down payment. The agreement will also cite the closing date and include the closing costs.
Inclusions and exclusions
The agreement should contain a list of items for inclusion or exclusion when the property changes hands, such as light fixtures, window treatments or built-in appliances. Upon final walk-through, the buyer should be able to check off items as listed in the agreement.
Disclosures
In the agreement, the seller must disclose anything about the property that could affect safety or future value. It is illegal not to reveal known defects. Examples are the existence of lead paint or termite damage.
Default
Canceling a residential purchase agreement is possible and both buyer and seller have cancellation opportunities. However, if one of the parties fails to uphold part of the contract, he or she may have defaulted. Default might occur if:
- The seller does not complete work as outlined in the agreement
- The seller does not vacate the property on time
- The buyer does not provide earnest money as required
- One party does not return signed disclosure forms in the time allotted
If one party defaults on the agreement, the other party might take legal action.