Real Estate Purchase Agreement: What You Need To Know [Part 1]

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Caroline Soriano
May 05, 2023
8 minutes, 45 seconds
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An agreement that controls the acquisition and selling of real estate in Indiana is known as a real estate purchase agreement. It specifies the parameters of the transaction and the circumstances under which a sale will take place and is made between a buyer and a seller.

Make sure your contract is unbreakable whether you want to sell your permanent residence or an investment property, purchase a new house, apartment, condo, or both.

It is crucial to take the time upfront to clearly define the conditions under which a property transaction will take place and to protect against potential delays or unforeseen events since it can help you avoid financial or legal obstacles later on. 

What Exactly Is A Purchase Agreement?

An agreement between a buyer and seller to conduct a real estate transaction is outlined in a real estate purchase agreement. By signing a purchase agreement, the buyer and seller are effectively "under contract," as is the subject property.

A real estate purchase agreement, also known as a real estate sales contract, home purchase agreement, real estate purchase agreement, or house purchase agreement, is a binding legal document that outlines important terms of the home sale transaction. 

In essence, when a prospective buyer submits an offer to buy a new house, the buyer will include essential financial information, including their offer price and suggested terms for the sale. The parameters of this offer will then be open for the house seller to accept, reject, or negotiate. 

Essentially, when a potential buyer files a purchase offer for a new home, the buyer will include crucial financial information, such as their offer price and suggested parameters for the sale. The home seller will then have the option to accept, reject, or negotiate the terms of this offer. 

This contract outlines the requirements that must be satisfied for the sale to close and for the new buyer to take the title of the property, signaling the parties' intent to engage in a home-selling transaction. 

Who Drafts The Purchase Contract?

The real estate agent representing the buyer will often draft and prepare the purchase agreement for a home. The fact that agents cannot draft their contracts because they are not licensed attorneys is important to note. Instead, they often complete forms that have already been developed by a legal firm that specializes in real estate transactions, for the sake of consistency and the protection of all parties.

In other words, a pre-drafted purchase agreement template will be used to purchase the particular house, with the agent filling in any blanks with specifics on the property's particulars.

Elements Of A Real Estate Sales Contract

The facts of the property transaction are outlined in a real estate sales contract and purchase agreement. You'll discover several recurring components within its pages, such as:

Appliances and fixtures: Any home appliances, wall-mounted accessories, and fixtures that are either included in or excluded from the sale of the real estate in Indiana. 

  • Financing: Exact information on how the buyer will pay for the home, including whether they will take on the seller's current mortgage or obtain a mortgage loan from a lender. 
  • Closing Date: The precise day of the legal transfer of title, as stated in your purchase agreement, as well as the time and date the buyer will receive the keys to the property.
  • Contingencies: Any requirements that must be satisfied before a property transaction closes, such as repairs that must be completed by a specific deadline or inspections that must be carried out.
  • Earnest Money: The conditions of any earnest money security deposits that must be made to demonstrate to the seller that the buyer is sincerely interested in buying the property.
  • Information for buyers and sellers: Full names and contact details for each buyer and seller participating in the transaction.
  • Lead-Based Paint Disclosure: As required by law, this provides the buyer with the chance to request an inspection, if necessary, for any home constructed before 1978.
  • Option to Terminate: The buyer may have the choice to end the agreement before closing and walk away from the transaction.
  • Property Taxes: Citations for any upcoming property taxes that will be levied on the property being bought.
  • Property Information: A description of the property, its address, and any other details that may be relevant.
  • Purchase price: The full selling price for the property as agreed upon, including any down payments or other fees related to the deal.
  • Representations And Warranties: Statements of truth concerning the state, character, and make-up of the asset being sold made by the seller under the heading of "representations and warranties" (the seller may include this information in a warranty deed). 
  • Signature: Each purchase agreement must be signed by all parties before it is complete.
  • Title Insurance: Note stating who will be responsible for obtaining title insurance to guard against potentially discoverable flaws in the property, the buyer or seller.

Contingencies 

A contingency is a requirement that needs to be satisfied and is dependent on certain occurrences in reality. A purchase agreement with contingencies in real estate specifies that even if an offer has been made and accepted on a property, there are still some conditions that must be met before the transaction is finalized. 

real estate agent giving key to new homeowner

When buying or selling a home, you could encounter many contingencies, such as:

Appraisal Contingency: To guarantee that the appraised value of a home is the same as or greater than the agreed-upon purchase price, an appraisal contingency is used.

  • Financing Contingency: This ensures that the buyer will receive their earnest money deposit returned if they are unable to secure a mortgage.
  • Home Sale Contingency: A clause that, in a way, ensures the buyer that their purchase of the property is contingent upon their ability to sell their current residence.
  • Inspection Contingency: This enables a buyer to get out of a real estate transaction if a subsequent examination reveals any problems with the property.
  • Title Contingency: A title report or chain of title that aims to reassure the buyer that the property is free of liens or other issues is known as a title contingency.

These are the basics of real estate purchase agreement. In the next part, we’ll dive deeper into earnest money deposit and closing expenses and answer some of the most frequently asked questions on purchase agreements.

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