Understanding A Purchase Agreement
Below, our friends from Hayhurst Law PLLC discuss the importance of understanding your purchase agreement when it comes to buying a home.
Why This One Document Could Make Or Break Your First Home Purchase
When you find a home you love and your offer is accepted, the next big step is signing the purchase agreement. For first-time buyers, this contract may seem like just another form in a stack of paperwork, but it’s actually one of the most important legal documents in the entire process. Understanding what’s in it (and what you’re agreeing to) can save you from costly surprises, disputes, and even lawsuits down the road.
What Is A Purchase Agreement?
A purchase agreement (sometimes called a sales contract or real estate contract) is a legally binding document that outlines the terms of the home sale. Once signed by both the buyer and seller, it becomes enforceable by law. That means both parties are legally required to follow the terms or face potential penalties.
This agreement includes:
- The purchase price
- Property details (address, parcel number, etc.)
- Deadlines for inspections, financing, and closing
- Contingencies that protect the buyer or seller
- What fixtures or appliances are included
- Earnest money deposit amount and refund conditions
Key Clauses Every Buyer Should Understand
Not all purchase agreements are the same. But there are a few standard clauses that every buyer should pay special attention to:
Inspection Contingency
Allows you to cancel or renegotiate the deal if the home inspection reveals major problems. Without it, you may be stuck buying a home with expensive repairs.
Financing Contingency
Gives you the right to back out if your loan falls through. Without this clause, you could still be legally on the hook, even if you can’t secure a mortgage.
Appraisal Contingency
Protects you if the home appraises for less than the agreed purchase price. This clause gives you room to renegotiate or walk away.
Closing Date
This is when the ownership legally transfers. Delays can trigger legal issues or financial penalties if not addressed properly.
Default Or Breach Of Contract
Outlines what happens if either party backs out without legal cause often involving forfeiting the earnest money deposit or potential legal action.
Why Legal Review Matters
Even if you have a real estate agent, it’s wise to have a postnuptial agreement lawyer who is also a licensed real estate attorney, review your purchase agreement especially if there’s anything unusual about the deal. Your agent can explain the market terms, but your lawyer is there to protect your legal rights.
A real estate lawyer can:
- Spot vague or risky language
- Suggest protective clauses
- Ensure deadlines are realistic
- Review addendums and disclosures
- Advise if the seller is asking for anything unreasonable
Once You Sign, You’re Committed
Once the purchase agreement is fully signed and accepted, you’re legally committed—unless a valid contingency gives you an out. Failing to meet your contractual obligations can result in losing your deposit or facing a lawsuit.
Don’t let excitement rush you through the legal side of buying a home. The purchase agreement may seem like just another form, but it’s the legal foundation of your biggest financial decision. Make sure you understand every word or have a legal professional who does.