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Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Creating a property purchase agreement is a critical step for any property transaction. Such an agreement establishes the terms and conditions of the deal between buyer and seller, as well as providing clarity around taxes, lenders and title transfer.

At ��������Ƶ, we understand that these agreements can be complex and difficult to navigate without expert guidance. That’s why we provide resources for anyone looking to draft or customize high-quality legal documents free of charge. Our open source legal template library has millions of datapoints teaching our AI what a market-standard property purchase agreement looks like - enabling users to create legally binding contracts with confidence.

Property purchase agreements ensure both parties are aware of their rights and obligations in any given situation, as well as protecting them from misunderstanding or dispute further down the line. Such agreements can also be used to provide valuable information to tax authorities and lenders – helping ensure all parties involved in the transaction are protected accordingly.

The ��������Ƶ team is committed to providing resources that make it easier for everyone – no matter their expertise – to draft legal documents without any hassle or cost. To read on for our step-by-step guidance on creating your own property purchase agreement, check out our template library today!

Definitions

Parties - People involved in a transaction.
Contact information - Information related to an individual or group, such as their name, address, and phone number.
Responsible - In charge of or accountable for something.
Boundaries - The limits of an area or property.
Square footage - The total area of a building or property measured in square feet.
Purchase price - The amount of money agreed upon by the buyer and seller for the sale of a property.
Payment terms - The conditions of how and when payments should be made.
Closing date - The date when the buyer and seller officially transfer ownership of the property.
Closing costs - Fees associated with the transfer of a property, such as title search, recording fees, and escrow fees.
Title issues - Legal problems related to ownership of a property, such as liens or encumbrances.
Contingency - A potential event or condition that could delay or prevent the closing of a property.
Dispute resolution - The process for resolving disagreements between two parties.
Applicable laws - Laws and regulations that must be followed for a transaction to be legally binding.

Contents

1. Establishing the parties to the agreement
2. Collecting contact information
3. Determining who is responsible for what
4. Identifying the property
5. Determining property boundaries
6. Describing the property in detail
7. Establishing the purchase price
8. Establishing a base price
9. Determining how and when to pay the price
10. Setting payment terms
11. Deciding who is responsible for paying what
12. Establishing payment deadlines
13. Setting closing procedures
14. Determining when the closing will take place
15. Deciding who is responsible for the closing costs
16. Addressing title issues
17. Investigating any existing title issues
18. Taking any necessary steps to clear title
19. Resolving disputes
20. Establishing a dispute resolution process
21. Determining who will be responsible for resolving any disputes
22. Addressing contingencies
23. Identifying any potential contingencies
24. Deciding how to address each contingency if it arises
25. Understanding the laws and regulations that apply to the agreement
26. Researching any applicable laws and regulations
27. Ensuring the agreement is in compliance with all laws and regulations
28. Drafting the agreement
29. Gathering all relevant information
30. Drafting the agreement in accordance with the terms and conditions
31. Reviewing and signing the agreement
32. Reviewing the agreement in detail
33. Signing the agreement in accordance with applicable laws
34. Finalizing the agreement

Get started

Establishing the parties to the agreement

• Identify the buyer and seller and make sure each party has the legal capacity to purchase and sell the property
• Verify the names, addresses, and other relevant contact information of both parties
• Check that all parties have the necessary authority to enter into and execute the agreement
• When all parties have been established and the necessary contact information has been collected, you can check this step off your list and move on to the next step.

Collecting contact information

• Gather the full legal name and contact information of each party involved in the agreement
• Obtain the contact information of the buyer and seller, including their physical address, phone number, and email address
• Make sure the contact information is accurate and up-to-date
• Once you have a complete and accurate contact information for all parties involved, you can move on to the next step.

Determining who is responsible for what

• Identify all parties involved in the agreement
• Figure out who will be responsible for what within the agreement
• Determine who will be responsible for any repairs, maintenance, taxes, insurance, etc.
• Establish who will be held responsible for any unanticipated costs
• Make sure all parties agree to and understand their responsibilities
• Once all responsibilities have been established and agreed upon, the parties can move on to the next step in the process.

Identifying the property

• Obtain a title search for the property, which will provide detailed information about the property’s ownership
• Make sure that all past owners are listed on the title search and that the title is clear of any liens or other encumbrances
• Consult with a real estate attorney to ensure that you have all the necessary paperwork required to legally purchase the property
• If the property is located in a state that requires a deed, obtain the deed from the seller

Once you have obtained the title search and any other necessary paperwork, you will be able to check this step off your list and move on to the next step.

Determining property boundaries

• Contact local land surveyor to determine exact boundaries of the property
• Work with real estate agent or title company to review the legal description of the property
• Ask the seller to provide a copy of the survey of the property
• Review the survey carefully to ensure accuracy and completeness
• Once you have verified the boundaries, you can move on to the next step of describing the property in detail.

Describing the property in detail

• Collect all documents related to the property, such as the deed, title, survey, and any other relevant documents
• Make a list of the property’s features and characteristics, including the size of the land, type of dwelling, number of bedrooms and bathrooms, location, etc.
• Make a list of any special features such as a pool, patio, or other features
• Check the deed to make sure it accurately describes the property
• Make a list of any improvements or modifications made to the property
• Once you have a clear description of the property, you can move on to the next step.

Establishing the purchase price

• Understand the local market, look at comparable homes, and come up with a fair market value for the property
• Reach an agreement with the seller on the purchase price
• Include contingencies such as inspections and contingencies in the purchase agreement
• Make sure to include the purchase price in the written agreement
• When you have a signed purchase agreement with both the buyer and seller, you can move on to the next step.

Establishing a base price

• Gather relevant information about the property such as purchase price, taxes, estimated closing costs, and any other necessary information
• Set a base price for the purchase agreement that reflects the estimated value of the property
• Have both parties agree to the base price and sign the agreement to make it official

Once the base price is agreed upon, signed, and documented, you can move on to the next step of determining how and when to pay the price.

Determining how and when to pay the price

• Research different payment methods and determine which is best for both parties
• Determine the amount that is due at closing and the amount of any deposits
• Decide on the payment schedule and the amount of any installments
• Make sure the payment method is documented in the agreement
• Once the payment method, amount due, and payment schedule are established and documented, this step is complete.

Setting payment terms

• Decide on the type of payment terms you will use, such as cash, check, or money order
• Set the payment terms, including the due date, any discounts for early payment, and any late fees
• Specify the payment method, such as direct deposit or bank transfer, and the details related to it
• Have both parties sign the agreement to make the payment terms legally binding
• You can check this off your list and move on to the next step once you have all the payment terms set, the payment method specified, and both parties have signed the agreement.

Deciding who is responsible for paying what

• Establish who is responsible for paying the full purchase price, the amount of the loan and closing costs
• Decide who will pay for the home inspection, appraisal, title insurance, attorney’s fees, transfer taxes, etc.
• Discuss who will pay for any repairs that need to be made to the property
• Agree on who will pay for any additional costs that might arise during the purchase process

Once you have established who is responsible for paying what, you can check this step off your list and move on to establishing payment deadlines.

Establishing payment deadlines

• Decide on the payment deadlines for both the buyer and seller.
• Agree on the payment terms, such as how much is due when, and any penalties for late payments.
• Decide on how the payments will be accepted, such as cash, check, credit card, or bank transfer.
• Include any fees associated with processing payments.
• Document the payment deadlines in the purchase agreement.

You can check off this step when the payment deadlines have been agreed upon and documented in the purchase agreement.

Setting closing procedures

• Choose a closing agent to conduct the closing on behalf of both parties
• Establish a closing date and time
• Determine where the closing will take place
• If applicable, decide who will bear the cost of transferring the title
• Review and sign the closing documents
• When all parties have signed the closing documents, the closing is complete

You’ll know you can check this off your list when all parties have signed the closing documents, and the closing is complete.

Determining when the closing will take place

• Contact the seller to discuss the proposed closing date
• Ask the seller to provide a list of all their conditions and contingencies prior to closing
• Work with the seller to determine a closing date that works for both parties
• Once a closing date is established and all contingencies are met, you will be able to move on to the next step of deciding who is responsible for the closing costs.

Deciding who is responsible for the closing costs

• Discuss who will be responsible for the closing costs with the seller and decide who will pay what.
• The buyer will typically pay for the majority of the closing costs, while the seller may pay some, or all, of the fees associated with the title search, title insurance, and deed recording.
• The buyer and seller may negotiate who pays certain fees, but it’s important to make sure that any agreement is in writing.
• Once an agreement has been reached, make sure to include it in the purchase agreement.
• You will know you can move on from this step when an agreement has been reached and written into the purchase agreement.

Addressing title issues

• Investigate any existing title issues as part of the due diligence process
• Ensure that any title issues are resolved before closing
• Obtain title insurance for the buyer
• Obtain a preliminary title report to review title issues
• Order a title search to identify any encumbrances or liens on the property
• Verify that the seller has the legal right to convey the property to the buyer
• Resolve any title issues before closing

You will know you have addressed all title issues when you have obtained title insurance for the buyer, obtained a preliminary title report, ordered a title search and verified the seller’s legal right to convey the property to the buyer.

Investigating any existing title issues

• Obtain a title search report from a reputable title company
• Review the title search to identify any potential title issues
• If necessary, contact the seller to discuss any potential title issues
• Once the title issues have been addressed and resolved, proceed to the next step - Taking any necessary steps to clear title.

Taking any necessary steps to clear title

• Check with the county to determine if there is a lien on the property
• Hire a title company to review the title history and provide a title insurance policy
• Obtain a payoff letter from any lienholders to be sure all liens are satisfied
• Request any other documents that may be necessary to clear title

When all lienholders have been paid off, all documents have been obtained, and the title company has issued a title insurance policy, the title will be cleared and you will be ready to move on to the next step.

Resolving disputes

• Research the local laws and regulations related to resolving disputes in the area where the property is located.
• Establish a process for resolving disputes between the buyer and the seller that is in compliance with the local laws.
• Include a clause in the agreement that stipulates that any disputes must be brought to the court of jurisdiction in the area where the property is located.
• Include a clause in the agreement that states that both the buyer and the seller must agree to abide by any decisions made by the court.
• Once the dispute resolution process has been established and included in the agreement, you can check this step off your list and move on to the next step.

Establishing a dispute resolution process

• Determine which method of dispute resolution is best for the parties involved, such as arbitration or mediation
• Discuss the terms and conditions of the dispute resolution process with all parties involved
• Outline the dispute resolution process in the property purchase agreement
• Make sure all parties understand the process and agree to it
• When the dispute resolution process is outlined and agreed upon, you can check this off your list and move on to the next step.

Determining who will be responsible for resolving any disputes

• Decide who will be responsible for resolving any disputes that arise during the purchase process
• Consider who is most qualified and able to resolve any issues that may arise
• Create a clause in the purchase agreement that outlines who will be responsible for resolving any disputes
• This clause should include the name of the party(s) responsible and how any disputes will be addressed
• Once the clause is drafted, reviewed, and agreed upon by all parties, this step can be checked off the list

Addressing contingencies

• Identify any potential contingencies in the agreement that could affect the ability to purchase the property.
• This could include issues such as needing a mortgage to purchase the property, pledging personal assets, or obtaining a loan.
• Make sure to include a clause in the agreement that outlines how each of these contingencies would be addressed if they arise.
• Once the contingencies have been addressed and added to the agreement, you can move on to the next step.

Identifying any potential contingencies

• Research any local and state laws that may affect the purchase agreement
• Consider the property’s condition and make sure any necessary inspections have been completed
• Identify any potential issues that may arise, such as zoning regulations, title disputes, or environmental issues
• Make sure that the agreement includes a clause about potential contingencies
• When you have identified any potential issues that could arise, you can check this step off your list and move on to the next step.

Deciding how to address each contingency if it arises

• Research applicable laws and regulations to determine how to address each contingency
• Consult a real estate lawyer if necessary
• Draft a detailed plan on how to handle each contingency
• Ensure the plan is compliant with applicable laws and regulations
• Review the plan with the other party involved in the purchase agreement
• Revise the plan as needed to reflect any changes that have been agreed upon
• Sign the plan and include it in the purchase agreement
• Once you have addressed each contingency, you can move on to the next step.

Understanding the laws and regulations that apply to the agreement

• Consult with a real estate lawyer to understand the laws and regulations that must be applied to the agreement
• Research any county, state, and federal laws that are applicable
• Read through any zoning regulations and deed restrictions that may apply
• Ensure that the agreement complies with all applicable laws and regulations
• When you are satisfied that the agreement complies with all applicable laws and regulations, you can move on to the next step.

Researching any applicable laws and regulations

• Research state, county, and local laws pertaining to the purchase of real estate
• Familiarize yourself with the applicable laws, including any tax implications
• Read the purchase agreement to ensure that all of the laws and regulations are being followed
• Consult with a real estate attorney or other qualified professional to ensure that the agreement is in compliance with all laws and regulations
• Make any necessary revisions to the agreement to ensure it is in compliance with all laws and regulations
• Once revisions have been made, verify that all laws and regulations have been followed and that the agreement is in compliance with all of them.

Ensuring the agreement is in compliance with all laws and regulations

• Consult a lawyer to advise on potential legal issues with the agreement
• Research any relevant statutes, regulations, and case law that may affect the agreement
• Make sure all parties meet all legal requirements for entering into the agreement
• Ensure that any required disclosures or notices are included in the agreement
• Ensure that any required signatures are included in the agreement
• Check that the agreement complies with any local or state requirements
• When all of the above steps have been completed and all legal issues have been addressed, the agreement can be considered compliant with all applicable laws and regulations.

Drafting the agreement

• Research state and local laws applicable to the agreement
• Create a written document that outlines the terms of the agreement
• Include the names of all parties involved, the property address and a detailed description of the property
• Include the purchase price, payment terms and closing date
• Outline any contingencies or special conditions
• Have all parties involved review the agreement and sign
• Once all parties have signed, make copies for each party

How you’ll know when you can check this off your list and move on to the next step:

• When all parties have signed the agreement and you have made copies for each party, you can move on to gathering all relevant information.

Gathering all relevant information

• Gather the buyer’s and seller’s names, contact information, and signatures
• Obtain the property address, legal description, and purchase price
• Collect financial documents, such as proof of income, proof of assets, and credit score information
• Gather any other relevant information necessary to complete the purchase agreement
• Confirm with the buyer and seller that all information is correct and up-to-date

Once all relevant information is gathered and confirmed, you can move onto the next step, which is drafting the agreement in accordance with the terms and conditions.

Drafting the agreement in accordance with the terms and conditions

• Gather all pertinent information, such as the buyer and seller’s names, address, and contact information
• Include information regarding the property, such as the purchase price, taxes, and any fees
• Include a description of the property and any conditions of sale
• Include any contingencies that must be met prior to the agreement being finalized
• Specify the terms of the purchase agreement, such as the payment schedule, closing date, and possession date
• Include any additional terms the parties have agreed upon
• Include any applicable state or federal laws that must be adhered to

When you have completed this step you will have a draft of the property purchase agreement that reflects the terms and conditions agreed upon by both parties. Once both parties have reviewed and agreed to the agreement, you can move on to the next step.

Reviewing and signing the agreement

• Ensure that all of the terms and conditions have been met and that both parties are in agreement
• Check for any missing information or any sections that need further clarification
• Read and understand the agreement thoroughly - if there are any discrepancies, discuss them with the other party
• Ensure that all parties have signed the agreement in the presence of a witness
• When all parties have signed and dated the agreement, it is legally binding - you can check this step off your list and move on to the next one.

Reviewing the agreement in detail

• Read through the agreement carefully, taking note of any clauses that may need further discussion or negotiation
• Ensure that each party has provided the necessary information and that all required documents are included
• Check to ensure that all the sections of the agreement are included and that all of the clauses are accurate
• Verify that all parties are in agreement with the terms and conditions of the agreement
• Once you have verified that all sections are included and all parties are in agreement, you can move on to the next step of signing the agreement in accordance with applicable laws.

Signing the agreement in accordance with applicable laws

• Have all parties initial each page of the agreement
• Have the signatories sign the agreement in front of a notary public
• Make sure the signatories are aware of their duties and obligations as specified in the agreement
• Make sure all parties have read and understood the agreement
• Make sure to have all parties present at the signing
• Once all parties have signed and initialed the agreement, each party should receive a copy

You’ll know when you can check this off your list and move on to the next step when all parties have signed the agreement and initialed each page.

Finalizing the agreement

• Ensure that all parties have signed the agreement in accordance with applicable laws
• Check that all signatures are valid and legally binding
• File the agreement with the appropriate government agency
• Make copies of the agreement for each party
• Keep a copy of the agreement for future reference
• You can check this off your list once all the above steps have been completed.

FAQ

Q: What is the difference between a property purchase agreement and a real estate contract?

Asked by John on March 15th, 2022.
A: A property purchase agreement is a legal document that outlines the terms of a real estate transaction between two parties. It sets forth the details of the transaction such as the purchase price, closing date, conditions of sale, financing arrangements, and any other conditions or contingencies that need to be met prior to closing. A real estate contract is a binding agreement between two or more parties that outlines the transfer of title to real estate. It is usually used in the sale of a home, where the buyer and seller enter into an agreement and the title passes from one party to another upon completion of all of the terms outlined in the agreement.

Q: What happens if one party breaches a property purchase agreement?

Asked by Jenna on June 5th, 2022.
A: If one party breaches a property purchase agreement, the other party can file suit for breach of contract. Depending on the nature of the breach, damages may be awarded to compensate for losses incurred as a result of the breach. The damages may include costs associated with repairing any damage done to property or recovering lost profits. Additionally, punitive damages may be awarded if the breach was intentional or malicious. In some cases, it may be possible for the injured party to obtain an injunction or restraining order to prevent further breaches from occurring.

Q: What should be included in a property purchase agreement?

Asked by Jeremy on October 17th, 2022.
A: A property purchase agreement should include information such as the date and place of execution; names and contact information of all parties involved; description of the property being sold; purchase price and payment terms; closing date; conditions of sale; special provisions; any insurance requirements; warranties and representations; financing arrangements; title insurance; recording information; taxes and assessments; contingencies; and signatures of all parties involved in the transaction.

Q: What happens if I don’t have a property purchase agreement when buying a house?

Asked by Luke on January 9th, 2022.
A: Without a property purchase agreement in place when buying a house, you risk not having any legal protection in case something goes wrong with your purchase. Having an agreement in place ensures that all parties involved are aware of their obligations and can help protect your interests in case there are any disputes or misunderstandings down the line. A properly written and executed property purchase agreement will also help ensure that all relevant laws are followed during the transaction process.

Q: Is it necessary to use an attorney when creating a property purchase agreement?

Asked by Matthew on August 28th, 2022.
A: It is not always necessary to use an attorney when creating a property purchase agreement, but it can provide additional protections for both parties involved in the transaction. An attorney can ensure that all relevant laws are being followed during the transaction process and can help identify potential issues that may arise during negotiations or other stages of closing on a home. Additionally, an experienced attorney will have knowledge about specific local laws that may come into play with your particular purchase agreement, which can help protect you from potential legal issues down the line.

Q: How does local law affect my property purchase agreement?

Asked by Alexa on July 3rd, 2022.
A: Local law can have a significant effect on your property purchase agreement as certain laws may give certain rights or restrictions that are applicable only in that jurisdiction. It is important to understand how local law applies to your situation so you can make sure all relevant laws are being followed during your transaction process. An attorney familiar with local laws can help you understand how they apply to your particular situation so you can make sure your interests are protected throughout your transaction process.

Q: Are there any special considerations I should take into account when creating my property purchase agreement?

Asked by Joshua on April 24th, 2022.
A: Yes, there are several special considerations you should take into account when creating your property purchase agreement. First, you should make sure all relevant laws are being followed during your transaction process so you can protect yourself from potential legal issues down the line. Additionally, you should consider any additional conditions or contingencies that may be necessary for your particular situation such as inspections or repairs prior to closing or financing arrangements with specific lenders or banks. Finally, you should make sure all warranties and representations made by either party are clearly outlined in writing so there is no dispute later on down the line about what was agreed upon at signing.

Q: How long does it take to create a property purchase agreement?

Asked by Joseph on February 16th, 2022.
A: The length of time it takes to create a property purchase agreement will depend on several factors including how much detail needs to be included in the document as well as how much negotiation is required between both parties involved in order to come to an agreement about certain details such as price and closing date. Most agreements can typically be drafted within several days depending on how complex they are but it is always best practice to consult an attorney who can provide guidance throughout this process and ensure that all relevant laws are being followed during negotiations and execution of documents.

Q: What types of clauses should I include in my property purchase agreement?

Asked by Noah on December 12th, 2022.
A: The types of clauses you should include in your property purchase agreement will depend on several factors including what state you live in as well as what type of arrangement you have with either party involved in this transaction (e.g., if there is financing involved). Generally speaking though common clauses found within most agreements include those pertaining to payment terms; closing date; conditions of sale; warranties and representations; financing arrangements; title insurance; taxes and assessments; special provisions (e.g., inspections prior to closing); recording information; and contingencies (e.g., repairs prior to closing). It is important to discuss these details with both parties involved in order to come up with an arrangement that works best for everyone involved.

Q: Can I create my own property purchase agreement without hiring an attorney?

Asked by William on September 30th, 2022.
A: While it is possible for you to create your own property purchase agreement without hiring an attorney, it is not recommended unless you have extensive knowledge about real estate law and local laws applicable to your particular situation as mistakes made during this process could lead to costly legal issues down the line if not handled correctly from day one (e.g., not following proper disclosure requirements). Additionally, having an experienced attorney review this document prior to execution can save time and money down the road if there are any disputes or misunderstandings between parties involved later on down the road which could have been avoided had an experienced professional been consulted from day one about this matter

Example dispute

Suing a Seller for Breach of Property Purchase Agreement

• Plaintiff may raise a lawsuit if they believe the seller has breached the property purchase agreement.
• The plaintiff must be able to prove that the seller has failed to meet the agreed-upon contractual obligations which are outlined in the purchase agreement.
• The plaintiff must also show that they suffered damages as a result of the seller’s breach, such as loss of income or additional expenses incurred.
• The plaintiff may be able to seek remedies such as specific performance, in which the seller is ordered to fulfill their obligations, or monetary damages for any losses suffered.
• If a settlement is reached, the parties may negotiate the amount of money that would be paid to the plaintiff, or the plaintiff may be able to seek a court-ordered remedy.
• If the plaintiff is successful in their lawsuit, they may be able to seek compensation for any losses suffered as a result of the seller’s breach. This could include the cost of repairs, lost rent, legal fees, and more.

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