Real Estate Purchase Agreement FAQ - United States
From LawDepot Law Library
A Real Estate Purchase Agreement is a sale agreement for completed homes. LawDepot's Real Estate Purchase Agreement deals with new houses (construction completed). It contains additional disclosure forms, if required.
What is unimproved property?
Unimproved property is land without significant buildings, structures, development, or site preparation. In essence, it is a raw piece of land.
What is an assumption?
An assumption occurs when a Buyer agrees to take responsibility for an existing mortgage on the property they are purchasing. Before taking this option you may wish to speak to the mortgagor to determine if this is the best course of action for both parties.
What is a Certificate of Value?
In Minnesota, a Certificate of Value is filed with a real estate transfer to provide the financial terms of the property transfer, which is used in the administration of the state education aid formulas.
What is the Conveyance Tax Certificate?
In Hawaii, all documents evidencing real estate transfers that are submitted for recording must be accompanied by a conveyance tax certificate. This form provides the Bureau of Conveyances with information concerning the grantor, the grantee, the property, the consideration and the financing terms.
What is the closing date?
The closing date is the date on which the Seller of a property delivers the deed and the buyer pays for it and can take possession of the house. Closing dates are typically 30, 60, or 90 days after the contract is signed. For people who are financing the purchase through a mortgage, you should ensure that the closing date will occur before the mortgage commitment letter expires.
What is a Declaration of Value?
In Iowa, this document is filed when the real estate transfer is filed with the county recorder. The Declaration of Value states the total consideration given by the Buyer to the Seller for the property.
What is earnest money?
Earnest money is the deposit that the Buyer is required to provide to the Seller up front, in order to convey that the Buyer is serious about purchasing the property. It is the cash deposit paid by the prospective Buyer to the Seller, as evidence of good faith to complete the purchase transaction. This deposit will be credited to the sales price upon closing but will be forfeited if the Buyer defaults. It ensures that the Buyer is serious about obtaining the necessary financing and fulfilling the other conditions necessary to purchase the house. Without earnest money, some buyers may not use their best efforts to obtain financing and may still be looking for a better deal on other houses. Often, if the Buyer does not proceed with the transaction, the Seller can keep the earnest money as damages.
What is the effective date?
The effective date is the date the contract comes into effect. It is the day that both parties sign the contract, or if the parties are signing on different days, the date the last party signs the contract.
What is an environmental assessment report?
An environmental assessment report is created by an environmental specialist who examines the property to determine if there are any characteristics of the property that are having a negative environmental impact on the property. For example, this report would inform the Buyer if there were any underground storage tanks on the property that were leaking a contaminant into the soil.
What is escrow?
Escrow refers to the situation where property is held by a neutral third party (the escrow agent) until closing (when all the terms of the contract have been satisfied). At closing, this third party transfers title of the property to the Buyer.
What is an escrow agent?
An escrow agent is an independent third party who holds property in trust pending completion of the terms of the Agreement. They are responsible for collecting payments from the Purchaser and giving those payments to the Seller. An escrow agent is administratively convenient for all parties to a sale transaction as they handle all funds, bills and documents relating to the sale transaction. Both the Seller and the Purchaser can give the escrow agent instructions - for example, if the Seller has failed to perform one of their obligations under the Agreement, the Purchaser can have the funds necessary to fulfill that obligation withheld from the Seller out of their monthly payment.
What is the Federal Housing Administration?
The FHA provides housing mortgage loan insurance to qualified applicants who get loans from certified lenders, guaranteeing the mortgage in the event of a default by the Buyer. The program allows those who typically would not be able to afford a mortgage to qualify for one because the FHA will pay the mortgage in the event of a default. The FHA assists those with poor credit history, those who cannot afford much of a down payment, and others who for one reason or another are unlikely to obtain a mortgage from a regular mortgage broker.
What are fixtures?
Fixtures are items of personal property that have been attached to land or buildings in such a way that they cannot be removed without damaging the item, land or building. As a Seller, you may choose to exclude some fixtures because they have sentimental value, if they are hard to replace, or for some other reason. Examples of fixtures usually include chandeliers, custom-made drapes, window blinds, built-in appliances, built-in cupboards, light fittings, and wall-to-wall carpeting.
What is a general warranty deed?
A general warranty deed is the document that is recorded at the county recorder's office which actually conveys title to real estate from the Seller to the Buyer. It contains a guarantee from the Seller that the Seller is entitled to sell the property, there are no outstanding encumbrances other than those listed on the deed, and the Seller will defend the Buyer against any claims brought against the property by individuals claiming to have a prior interest in it.
What is an Inventory of Property Transfer?
New Hampshire law requires all buyers of real estate to complete and file an Inventory of Property Transfer with the New Hampshire Department of Revenue Administration within 30 days of closing. It contains information relating to the circumstances of the sale, as well as the Buyer's opinion as to whether or not the purchase price reflected fair market value for the property.
What is the legal land description?
The term "legal land description" refers to the format used in your jurisdiction to officially describe sections of land for the purpose of government records. The legal land description is how government records define the land that you have title to. In North America, most jurisdictions use a township and ranges system. The legal land description may may be conveyed in various ways with the most common way being a series of numbers, such as SW19-57-8-W5. Your legal land description may be found on your land title, in tax assessment information, and in your mortgage agreement. It is NOT your street address.
What is a Mello-Roos community?
In California, this term is used to refer to new communities where a special tax is levied in order to help defray some of the costs of developing and maintaining the infrastructure of the community.
What is a promissory note?
A promissory note is a legal document evidencing that the borrower will repay a loan to the lender under the terms agreed upon in the contract.
What is a Real Estate Transfer Tax/ Deed Tax/ Conveyance Tax?
Most U.S. states collect a tax for every transfer of real estate that is registered. Some states also require additional documentation to accompany the payment of the real estate transfer tax.
What is a Real Estate Sales Validation Questionnaire?
A Real Estate Sales Validation Questionnaire is a form created by the Kansas Department of Revenue that is designed to help study the relationship between assessed and market values of property. It is required for real estate transactions involving land located in Kansas, unless the property qualifies for an exemption.
What is the difference between a Residential Property Condition Disclosure Statement and a Residential Property Condition Disclaimer Statement?
In Oklahoma, a Disclaimer Statement is used if the Seller has never occupied the property and makes no disclosure as to the condition of the property, or where the Seller has no actual knowledge of any defect. The Disclosure Statement is used where the Seller has occupied the property at some point in time, and the Seller is able to make disclosures as to the condition of the property.
What is a residential services contract?
A residential services contract is a contract from a home warranty company to maintain, repair or replace all or any part of the appliances, structural components, electrical, plumbing, heating, or air conditioning systems of residential property. The contract is usually for a period of 1 year.
What are riparian matters?
The term "riparian" refers to bodies of water such as rivers and lakes which are located on or adjacent to property. The term "riparian matters" refers to legal rights that the property owner has in relation to such bodies of water.
What is a Sales Listing Form?
In West Virginia, a Sales Listing Form must be completed and delivered to the tax commissioner for every transfer of real estate. It must contain information such as the tax map and parcel number of the property, the district or municipality in which the real property lies, the address of the property, the amount and form of consideration, and any other financing arrangements. It must also contain one of the following: a) the names of the grantor and grantee, and the deedbook and page number; b) the source of the grantor's title, if known; or c) a description of the property and the name of the person to whom real property taxes are assessed as set forth in the landbook prepared by the assessor.
What is the Shoreland Zone?
Under Maine law, the Shoreland Zone is defined as land that falls within 250 feet of the normal high-water line of large bodies of water, within 250 feet of the upland edge of non-forested freshwater and coastal wetlands or within 75 feet of certain streams.
What is soil remediation?
Soil remediation is the process of removing, reducing or neutralizing industrial soil and sediment contaminants that threaten human health and/or ecosystem productivity and integrity.
What is specific performance?
Specific performance is a court action to compel a contractual party to fulfill their obligations under the contract.
What are prorations?
Prorations are expenses or benefits that are shared proportionately between the Buyer and the Seller.
What is a tenancy at sufferance?
In the context of homebuying, the term "tenancy at sufferance" refers to the situation where the owner of the property does not have possession. It can occur when the Seller retains possession after the deal has closed and title has been transferred to the Buyer, or where the Buyer receives possession before closing and the Seller still retains title to the Property.
What is title insurance?
Title insurance is a form of insurance in which the insurer agrees to indemnify the insured party for any loss suffered that results from a defect in the title to the property that was unknown to the buyer at the time of the sale. A title policy of insurance insures the homebuyer against any encumbrances that may affect the title to their property. The policy is required by most institutional lenders in order to get a mortgage and will pay the value of the mortgage in the event that there is a defect in the title that voids the buyers title to the property. It is an alternative to getting a municipal compliance certificate or real property report.
What is the Veterans Administration?
The Veterans Administration (VA) provides housing mortgage loan insurance to qualified applicants who get loans from certified lenders in the event of default by the home purchaser. The program allows those who typically would not be able to afford a mortgage to qualify for one because the VA will pay the mortgage in the event of a default.
What is a Well Disclosure Certificate?
A Well Disclosure Certificate is required to be attached to a deed in the state of Minnesota if the property being transferred contains new wells that were not listed on the previous Well Disclosure Certificate. This document does not need to be included with a deed if the property does not contain any wells, or if all of the wells have already been disclosed on a prior certificate.
What sort of situations is this contract good for?
This contract is used when there is an agreement to purchase a house. If you want to put an offer on a house and subject it to certain events such as selling your own home, then you should purchase an Offer to Purchase Agreement.
What is the law that governs the sale of real estate?
Real estate transactions are governed by the real property law of your state. Below are links to all the state legislation so you can get a better idea of the law.
States and URLs
- Alabama http://www.legislature.state.al.us/CodeofAlabama/1975/coatoc.htm
- Alaska http://touchngo.com/lglcntr/akstats/Statutes/Title34/Chapter15.htm
- Arizona http://www.azleg.state.az.us/ArizonaRevisedStatutes.asp?Title=33
- Arkansas http://www.lexisnexis.com/hottopics/arcode/Default.asp
- California http://www.leginfo.ca.gov/cgi-bin/calawquery?codesection=civ&codebody=&hits=20
- Colorado http://www.michie.com/colorado/
- Connecticut http://www.cga.ct.gov/2005/pub/Title47.htm
- Delaware http://delcode.delaware.gov/title25/c003/index.shtml
- District of Columbia http://government.westlaw.com/linkedslice/default.asp?SP=DCC-1000
- Florida http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Index&Title_Request=XL#TitleXL
- Georgia http://w3.lexis-nexis.com/hottopics/gacode/default.asp
- Hawaii http://www.capitol.hawaii.gov/hrscurrent/Vol12_Ch0501-0588/HRS0501/
- Idaho http://www.legislature.idaho.gov/idstat/Title55/T55.htm
- Illinois http://www.ilga.gov/legislation/ilcs/ilcs2.asp?ChapterID=62
- Indiana http://www.in.gov/legislative/ic/code/title32/
- Iowa http://www.legis.state.ia.us/Current/tablesandindex/
- Kansas http://kslegislature.org/li/statute/058_000_0000_chapter/
- Kentucky http://www.lrc.state.ky.us/KRS/382-00/CHAPTER.HTM
- Louisiana http://www.legis.state.la.us/lss/lss.asp?doc=181355
- Maine http://janus.state.me.us/legis/statutes/33/title33ch1sec0.html
- Maryland http://www.michie.com/maryland
- Massachusetts http://www.mass.gov/legis/laws/mgl/gl-184-toc.htm
- Michigan http://www.legislature.mi.gov/mileg.asp?page=getObject&objName=mcl-R-S-1846-554-1-62&highlight=
- Minnesota http://www.revisor.leg.state.mn.us/stats/507/
- Mississippi http://www.mscode.com/free/statutes/89/001/index.htm
- Missouri http://www.moga.mo.gov/STATUTES/C442.HTM
- Montana http://data.opi.mt.gov/bills/mca_toc/70.htm
- Nebraska http://uniweb.legislature.ne.gov/laws/browse-chapters.php?chapter=76
- Nevada http://www.leg.state.nv.us/NRS/NRS-111.html
- New Hampshire http://www.gencourt.state.nh.us/rsa/html/NHTOC/NHTOC-XLVIII-477.htm
- New Mexico http://www.conwaygreene.com/nmsu/lpext.dll?f=templates&fn=main-h.htm&2.0
- New Jersey http://lis.njleg.state.nj.us/cgi-bin/om_isapi.dll?clientID=162539&depth=2&expandheadings=off&headingswithhits=on&infobase=statutes.nfo&softpage=TOC_Frame_Pg42
- New York http://public.leginfo.state.ny.us/menugetf.cgi?COMMONQUERY=LAWS
- North Carolina http://www.ncga.state.nc.us/gascripts/Statutes/StatutesTOC.pl?Chapter=0039
- North Dakota http://www.legis.nd.gov/cencode/t47c10.pdf
- Ohio http://codes.ohio.gov/orc/53
- Oklahoma http://www.lsb.state.ok.us/osStatuesTitle.html -- access title 60
- Oregon http://landru.leg.state.or.us/ors/093.html
- Pennsylvania http://www.pacode.com/secure/browse.asp
- Rhode Island http://www.rilin.state.ri.us/Statutes/TITLE34/34-11/INDEX.HTM
- South Carolina http://www.scstatehouse.gov/code/titl27.htm
- South Dakota http://legis.state.sd.us/statutes/DisplayStatute.aspx?Type=Statute&Statute=43-4
- Tennessee http://www.michie.com/tennessee
- Texas http://www.statutes.legis.state.tx.us/
- Utah http://www.le.state.ut.us/~code/TITLE57/57_01.htm
- Vermont http://www.leg.state.vt.us/statutes/sections.cfm?Title=27&Chapter=005
- Virginia http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+TOC55000000004000000000000
- Washington http://apps.leg.wa.gov/RCW/default.aspx?cite=64.04
- West Virginia http://www.legis.state.wv.us/WVCODE/Code.cfm?chap=37&art=1
- Wisconsin http://folio.legis.state.wi.us/cgi-bin/om_isapi.dll?clientID=31194982&infobase=stats.nfo&jump=ch.%20706
- Wyoming http://michie.lexisnexis.com/wyoming/lpext.dll?f=templates&fn=main-h.htm
When can a real estate contract be terminated?
There are two ways to terminate a real estate contract - you can either include an option to terminate in the contract, or rely on the statutory provisions of your state. State laws commonly allow a real estate contract to be terminated for the Seller's failure to disclose material facts to the Buyer. To get a better idea of what your state law permits, please click on the link for your state above.
Where can I obtain the legal land description of my property?
You should be able to obtain the legal land description of your property from the County Recorder's office (may also be called County Clerk or Register of Deeds office). The legal land description of your property may also be found on your land title, in tax assessment information, and in your mortgage agreement.
What is the municipal description of my land?
The municipal description of the property is the street address of the property as it would be affixed on a postage envelope. For example, 1234 Oak Street, Los Angeles, California 90001.
My property is subject to a lease that expires prior to the closing date. Should I describe the lease in the real estate purchasing agreement?
No, you do not need to include a description of a lease which terminates prior to the closing date since the lease will not affect the Buyer. Any leases that extend beyond the closing date must be accurately described in the purchasing agreement, and a copy of the lease should be provided to the Buyer.
What happens if I forget to include in the list of excluded items a fixture that I want to exclude from the sale of my property?
If the item has become affixed, or permanently joined, to the property, it is assumed to be included in the sale unless specifically excluded in the purchasing agreement.
As a Buyer, should I request a new survey of the Property?
Even if the Seller can provide a copy of a survey that was completed within the past year, you should still request a new survey in case there has been a change in the Property since the last survey was completed. Alternatively, you could request a declaration that there have been no additions to the buildings on the Property.
What should I disclose to the Buyer?
Each state has different requirements as to what should be disclosed. To protect yourself, in addition to completing the state-specific disclosure form provided with the purchase agreement, you should disclose any material defects affecting the Property of which you are aware.
What are the statutory disclosure requirements?
Statutory disclosure requirements vary from state to state, but generally the Seller is required to disclose any known defects in the physical condition of the property that may materially affect its value, including items such as malfunctioning appliances, pest control problems, mold problems, structural issues with the home, roof defects, etc.
Each state has different requirements as to what should be disclosed, so we recommend that you make yourself aware of the statutory disclosure requirements for your state. To protect yourself, in addition to completing the state-specific disclosure form provided with the purchase agreement, you should disclose any material defects affecting the Property of which you are aware. If you are unsure of what you should include, please contact an attorney.
Why have I not been given the option of providing a disclosure statement to the Buyer?
If you have not been given the option of providing a disclosure statement to the Buyer then in your state, the disclosure statement is a required document, and you do not have a choice as to whether or not to complete the disclosure form.
What is an R-value?
The R-value of a building material is the resistance the material has to the movement of heat. The higher the R-value the better your house will be insulated against the cold or the heat. The R-value of a material can be found by looking on the packaging or by phoning the manufacturer.
How do I know how thick my insulation is?
The thickness of the insulation in your home will likely be given to you by the contractor who built the home or you will have to get the measurements by looking at the building plans. The only thickness that is relatively standard and likely fixed is the 3.5" insulation in the walls, if you have standard 2" X 4" construction of the walls.
Should unresolved disputes go to mediation?
Mediation is a way to resolve disputes in a less formal, less rigid and generally more cost effective manner than going to court. It allows both sides to talk candidly about their issues and bring all issues to the forefront. Mediation is generally non-binding on the parties so that either party can walk away without a resolution if they feel the process is being handled improperly. That being said, the cost savings of mediation and the opportunity for alternate solutions that creates gain for both parties, as opposed to a win/lose situation in litigation, makes the process very appealing for small disputes.
Should unresolved disputes go to arbitration?
The parties are free to decide whether or not disputes that are not resolved by mediation should go to arbitration. If arbitration is agreed upon by the parties, the decision of the arbitrator will be binding on both parties.
Does a Real Estate Purchasing Agreement have to be notarized in order to be valid?
No, this document does not have to be signed by a notary public since it does not get filed with the county recorder's office. The Purchase Agreement only evidences a contractual relationship between the Seller and the Buyer, and does not actually convey the property from the Seller to the Buyer.
Do I need to have witnesses when I sign the Purchasing Agreement?
No, witnesses are not required, but it is advisable for both parties to insist upon there being witnesses present who can later testify, if a dispute arises, that the parties did in fact freely sign the contract.