Real estate transactions for residential properties have two stages. Before closing the deal with a deed, the two parties enter a real estate purchase agreement. It’s the document that outlines the terms of the deal, including the price and all the relevant information.

The purchase agreement is not just an informal sketch of the future deed; it’s a legally binding contract that can include provisions in case one of the parties decides to back out of the deal. It’s a useful tool, given that the real estate field is fluctuant and contingencies happen quite often.

What Is a Purchase Agreement?

The purchase agreement form is a binding legal document that sets the terms of a real estate transaction. Since prices are usually high in real estate, a verbal agreement isn’t reliable enough. So, to avoid any conflict between the seller and the buyer, all the relevant aspects are mentioned in a real estate purchase agreement.

To make sure they are dealing with serious buyers, the seller can ask for a deposit, usually 1 to 3% of the price. That deposit is mentioned in the purchase agreement, and it isn’t refundable in case the buyer decides to drop out of the transaction. It’s a type of real estate contract that provides security for both parties and sets the ground for the final document that closes the deal.

Types of Purchase Agreements

There are three significant types of purchase agreements:

  • The residential real estate purchase agreement – it’s one of the house for sale by owner forms, and its written proof of the terms of the future transaction and of the fact that both parties agree to the terms and intend to close the deal.
  • The commercial real estate purchase agreement – it has the same utility, but it’s issued for non-residential pieces of property.
  • The stock purchase agreement – this purchase agreement is used when a party wants to buy a part of or an entire business entity.

When Do You Need a Purchase Agreement and Why?

Anyone who wants to buy a piece of real estate should issue a purchase agreement. These transactions don’t always run smoothly, and problems, delays, and misunderstandings can appear along the way. A real estate purchase agreement keeps things simple and straightforward. All the relevant information is entered from the start, as well as the way any contingencies will be handled.

The real estate contract is beneficial both to the buyer and the seller of the real estate property; it clearly states the legal right of each party, as well as their duties before closing the deal. It can be used for many types of properties, as long as the construction is complete.

Many misunderstandings and problems may appear, but the most common one is the buyer not being able to get financing for the purchase. In this case, they lose the deposit, if one was made. The seller is left without a buyer, but they get some retribution for the time they wasted.

What to Include in a Purchase Agreement?

The real estate purchase agreement is a comprehensive document that includes essential information and must be issued with a lot of attention. It sets the terms of the transaction and the penalties for breaking the deal, so you must make sure it’s written correctly, with a real estate for sale by owner contract template.

You can download a free printable real estate purchase agreement PDF that we created at CocoSign to make sure your document is well-structured and clear. Regardless of how you choose to write it, make sure the following elements are included:

  • The date when the purchase agreement becomes effective
  • The name and address of both the buyer and the seller
  • The address and legal description of the property
  • Personal property included in the transaction (AC units, for example)
  • The price, or earnest money
  • Mention if the buyer wants to submit a cash payment
  • If the buyer intends to use bank financing to buy the property, the purchase agreement must state that
  • If the seller is the one providing financing, it should be clearly mentioned
  • Mention which party will pay the closing costs, and the deadline
  • The property condition must be clearly stated; the buyer can bring professional to inspect it
  • Set the date by which the transaction must be completed, and the expiration date of the agreement
  • Disclosures, if there are any
  • The date and signatures of both parties


A purchase agreement is essential for any real estate transaction in any state. It contains all the relevant information and sets the ground for the final document that closes the deal. A real estate contract also makes sure neither party loses time or money and that contingencies are avoided or easily handled.

If you need to issue a real estate purchase agreement, try the purchase agreement form we have at CocoSigns. We have a lot of excellent templates for all the documents you may need to write, and they are all user friendly and accurate.

Purchase Agreement FAQs

What is the assumption of mortgage?

The assumption of mortgage means that the buyer takes over the seller’s liability as far as the mortgage is concerned and that they accept to pay any remaining amount.

What happens if we don’t use a purchase agreement?

In the absence of a real estate purchase agreement, both parties can lose time, the seller can lose money, and the buyer can lose the property if it turns out the seller cannot provide the title.

What does escrow mean?

Escrow is a third party that has to be neutral and holds the deposit until the transaction is completed.

What is the appraisal contingency?

It’s the term of the purchase agreement that helps the buyer back out of the deal if a licensed appraiser decides that the actual price of the real estate property is lower than what the seller is demanding.

What is the lead-based paint disclosure?

If you want to sell a house built before 1978, you are obligated to provide this disclosure, mentioning any possible health risks and giving the buyer a chance to conduct an inspection.

All Purchase Agreement Templates

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