As a home buyer, you will see a lot of paperwork cross your desk (or desktop, more accurately). But none is more important than the real estate purchase agreement, a document that seals your – and the seller’s – commitment to the transaction.

This post explores the rudiments of real estate purchase agreements to help novice and seasoned home buyers alike navigate the process with confidence.

Real Estate Purchase Agreements 101

Let’s make good on the promise in this article’s title and answer the (perhaps literal) million-dollar question: What is a real estate purchase agreement?

A purchase agreement is a legally binding document the buyer and seller sign to govern the transaction. It defines all sorts of terms and conditions: purchase price, contact information, contingencies, closing date, etc.

What’s in a Purchase Agreement?

The section above gestured at the contents of a real estate purchase agreement, but let’s review it in greater detail. A purchase agreement may include the following:

  • Full legal names and contact information for both parties
  • The address of the property, a description, and fixtures included and excluded from the sale
  • Contingencies or, essentially, conditions on the sale, like a “condition to financing” (whereby the sale falls through if a buyer can’t get mortgage approval) or “condition to inspection” (whereby a buyer can professionally inspect the home to ensure it’s in working order).
  • A timeline for closing and a possession date
  • Closing costs and responsibilities
  • And any other grounds for terminating the agreement

The purchase agreement’s contents aren’t limited to the components above; these items represent common elements in most purchase agreements.

Who Drafts the Agreement?

Your real estate agent drafts the agreement, which is why it’s essential to find trustworthy representation in line with your values and needs.

Especially where contingencies, termination options and disclosures are concerned, you want to know that your real estate agent is a) thorough and b) respectful of your unique financial situation and risk tolerance. “Shopping for the right home is not one-size-fits-all,” real estate expert Regan McGee reminds us. You can use his platform, Nobul, to search and evaluate your agent options.

“We aim to facilitate homebuyers’ ability to choose the agent best suited to their needs,” McGee tells Superb Crew, “and support them end-to-end throughout their real estate journey.”

What Should You Do Before Signing an Agreement?

As with any contract, the key here is to execute due diligence. Read the agreement front to back, and make personal notes if necessary. If there are any terms, figures or lines of verbiage you don’t understand, ask your real estate agent – that’s what they’re here for!

The agreement becomes a legally binding contract once you jot your signature down. At this point, you may not be able to alter the document (unless you have a particularly generous seller willing to revise – but don’t bank on it). Therefore, it’s imperative that you read and agree before signing your name.

Hopefully, this “101” guide to real estate purchase agreements helps you feel more confident. Signing a contract worth potentially hundreds of thousands of dollars can seem daunting. To prepare, find a trustworthy real estate agent, do your due diligence and familiarize yourself with the standard agreement contents.