A purchase agreement is a contract that outlines the conditions of the sale of a home. Once the buyer and seller have agreed to these conditions and apply their signature, this document becomes legally binding.
A purchase agreement covers different topics such as home financing, repairs, closing details, and the final date the buyer can take possession of the property. If certain terms are not met, the sale may not go through. This is why drawing up a purchase agreement and following through with each detail carefully is essential in a For Sale By Owner (FSBO) deal.
Who Draws Up Purchase Agreements?
Typically the seller’s agent is the person who is held responsible for this task. However in a FSBO situation, the seller can employ a real estate attorney or lawyer. Some states require these agreements to be put together by state-licensed lawyers anyway. They will have the most experience and they’ll be able to explain the sometimes difficult-to-read addendums that cause confusion or miscommunication in a deal.
Not only that, real estate laws vary from state to state. So if you have any questions regarding requirements you need to fill, or how much you should pay in property taxes and special assessments, an experienced lawyer is your best bet.
What Goes Into a Purchase Agreement?
There’s a number of details included in a FSBO purchase agreement, but here are the basics:
- About the property: the location, address, and description of the land if necessary
- About the parties involved with the sale: the names of the buyer(s), seller(s), and their representatives (if this applies)
- Cost details: total cost of the home, the earnest money deposit amount, and the down payment amount
- How the sale is financed: the terms of the mortgage
- Closing terms: the date and location of closing, and who will be present with certain items (such as the title)
- Points of conflict resolution: safe options to terminate the contract
Within this list you will see plenty of contingencies that need to be met in order for the sale to happen. Think of them as an “if-then” proposition. So, if the buyer can’t get financing at a certain interest rate by a certain date, then they can back out of the sale without penalty.
The most common type of contingency has to do with the home inspection, where the buyer has an opportunity to discover any defects. If the inspection report comes back with issues such as termites or small cracks in the foundation, the buyer can require the seller to fix the issue before closing.
Special disclosures are also written into FSBO purchase agreements. Sellers are obligated to reveal any information that impacts the health and safety of future tenants, or affects the value of the property. A lead paint disclosure is a common example because of the negative health risks associated with this product.
Parties may also want to spell out other custom details in their FSBO purchase agreement. So if a buyer wants to include items such as the washer and dryer, this is the place to clarify that. Pay attention to every part of the contract because any disputes could mean a considerable delay in the sale.
For an example of a working sale agreement, the sample provided here showcases a typical Florida agreement with short explanations of the legal language inside. This will help you become comfortable working with real estate documents during the FSBO process.
There are fees associated with drawing up a FSBO purchase agreement. It’s considered a closing cost, and when it comes to closing costs, everything is negotiable. Buyers usually pay a certain percentage and may ask for some expenses to be covered by the seller. The costs can be agreed upon between both parties beforehand.
Residential real estate attorneys not only draw up purchase agreements, they also oversee the other tasks and help you cover common legal pitfalls. A good lawyer will guide you through all the paperwork and communicate with the title or settlement company to ensure the transaction goes smoothly. Some lawyers will charge by the hour ranging from $150 to $300, or fixed rates based on a per-service model. Either way, it’s a good idea to budget for this cost in the sale of your home.
beycome’s Free Executive Contract & Offer Generation Tools
When you work with beycome, you don’t have to worry about writing FSBO purchase agreements from scratch. Listing with us means that buyers and renters have the ability to make an official offer to the property of their dreams through our UI in just 3 minutes (and homeowners have the ability to accept, counter, or reject the offer at just a simple click of a button). It gets better: once the time has come for you to close, we provide you with a free legally-written and reviewed final contract for all parties to read, sign, and seal. Who else can say that?
For additional resources, feel free to check out some samples of real estate contracts common in the state of Florida and New York: