Because it sets forth the terms of sale and the relative rights and obligations of the parties, the purchase agreement remains the single most important document in any real estate transaction – residential or commercial. While not all purchase agreements are created equal, every purchase agreement should address at least the following:
- Names and contact information for the parties and agents.
- Address and legal description of property.
- All personal property included or excluded from the sale.
- Price and terms of sale (such as cash, cash with new mortgage, or land contract).
- If cash with new mortgage, the terms of buyer’s financing and deadline to obtain approval.
- Type of deed by which title will be transferred.
- Amount of the security deposit, who will hold it, and its application or forfeiture.
- Seller’s obligation to provide title insurance and buyer’s right to object to the condition of title.
- Buyer’s right of inspection.
- Possession and post-closing occupancy details.
- Proration of property taxes and assessments.
- Identity of any real estate agents involved and who will pay the commissions.
- What happens in the event of a default.
- Deadline to close and allocation of closing costs.
While a detailed recitation of the possible variables for each of these is beyond the scope of this piece, suffice it to say that they are many and can have substantial adverse consequences if overlooked or misunderstood. And, more importantly, the time to address them is BEFORE the purchase agreement is signed; after is too late.
If you’re contemplating a real estate purchase or sale in this new year, we’re happy to help. Call us at (248) 477-6300.