A purchase contract is an essential part of the process of a real estate transaction. It spells out clearly all the details of the sale from the property itself to the financial end of things. Purchase contracts are very detailed and legally binding documents and can be more than a little confusing for both buyers and sellers. To dispel some of that confusion, here is everything Salt Lake buyers and sellers need to know about purchase contracts.
Purchase Contract Overview
Purchase contracts spell out in detail all the agreed-upon under which Salt Lake buyers and sellers “agree to engage in a real estate transaction. The completion and signing of a purchase [contract] effectively place both the buyer and seller (as well as the property in question) ‘under contract.’” Basically, a purchase contract is a legally binding agreement that lays out the key details of a real estate sale transaction.
When a buyer makes an offer to purchase a home, she will “propose conditions for the sale and spell out the important financial details such as [the] offer price.” The seller will then accept, reject, or negotiate new terms for the offer. After any negotiations involving counteroffers, both buyer and seller sign the purchase contract when they are satisfied with all the terms. “At this time, both the property that’s up for sale and any parties to the agreement (for example, the home buyer and seller) will be determined to be ‘under contract.’”
Purchase contracts signal “the intent of all parties to engage in a home sale transaction and [explain] which conditions must be met for the sale to close and ownership of the property to transfer to the new buyer.” Typically, the buyer’s agent will draw up the purchase contract. Because agents are not attorneys, they cannot create a contract from scratch, so they use a template and adapt it for specific transactions.
To learn more about purchase contracts, you can contact a [market city] agent at (801) 755-3865.
What a Purchase Contract Is Not
Although they seem the same at first view, purchase contracts and purchase and sale agreements (PSAs) are different.
“A purchase and sale agreement, or PSA, is a document that is written up and signed after a buyer and seller mutually agree on the price and terms of a real estate transaction. . . . [It] includes details like earnest money needed, the closing date and specific contingencies the buyer and seller have agreed to. The PSA is where the seller and buyer agree on the terms for purchasing the home and sets the transaction in motion toward the closing.”
Though that sounds very much like a purchase contract, it is not. “Signing a PSA does not complete the sale of the home. Signing a purchase [contract], however, does complete the home sale. Where the PSA lays out the details of the transaction leading up to the closing date, the purchase [contract] is what you sign to finalize the transaction.
Common Elements of Purchase Contracts
Purchase contracts are very detailed documents and specific legal requirements can vary from state to state. There are, though, some common elements that you’ll find in all purchase contracts, for example . . .
- Buyer and seller information – Full names and contact information for all buyers and sellers involved
- Property details – Address, property, description, and other pertinent details
- Purchase price – “The total agreed-upon selling price for the property, including any deposits or additional costs associated with the transaction”
- Representations and warranties – “Statements of facts made by the seller regarding the condition, structure, and composition of the property that is being sold”
- Financing – Specific details explaining how the buyer will pay for the property
- Fixtures/appliances – Statement about what fixtures and appliances will or will not be included in the sale
- Title insurance – “A note specifying whether the buyer or seller will be responsible for purchasing title insurance to protect against potential discoverable defects in the property”
- Property taxes – “Citations regarding any property taxes that will be imposed on the property that is being purchased”
- Closing date – The exact on which the transfer of title will take place
- Contingencies – Any condition that must be met before the sale can go through, such as an inspection contingency
- Earnest money – “Terms of any earnest money security deposits that must be made to show the seller in good faith that the buyer is interested in purchasing the property”
- Option to terminate – “[O]ption for the buyer to back out of the deal and terminate the contract up until a certain time before closing”
- Lead-based paint disclosure – Required by law for homes built before 1978
- Signatures – Signatures of all parties involved to finalize the contracts
Purchase Contract Assistance
Purchase contracts are designed to protect both buyers and sellers and ensure a smooth transaction throughout the process. It’s imperative, then, that whether you’re a Salt Lake agent. For any assistance you may need with purchase contracts, contact us at (801) 755-3865.