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The Real Estate Purchase Agreement, Explained

September 5, 2019

You don’t have to be a lawyer to know that contracts can get complicated.

In a real estate transaction, you’re dealing with large sums of money that are exchanged between parties. As you can guess, a lot of money comes with a lot of liability.

As a real estate agent, it’s your job to serve the best interest of your client(s). To protect their money and assets during the closing process, you need to be familiar with the intricacies of a real estate purchase agreement.

Below, we’ll outline the main components of a real estate purchase agreement to help you get familiar.

What’s included in a real estate purchase agreement?

As previously mentioned, the most common type of real estate contract is a purchase agreement. This is a legally binding contract that includes all of the necessary details of the real estate transaction. Its purpose is to outline all of the terms that need to be met in order for the sale to officially close.

Sound complicated? Well, it can be. That’s why most property buyers and sellers rely on their real estate agents for help when it comes to drafting this agreement to ensure that it’s in accordance with local laws.

Let’s break down each component more in-depth.

Basic information

A purchase agreement can be as long or as short as the parties involved want it to be. However, there is some information that must be included in order for the contract to be considered valid:

  • Address and legal description of the property
  • Name of the buyer and seller and the type of entity each party is (i.e. a business, individual, married couple, etc.)
  • Date of the contract and the date that the offer expires, if applicable
  • The final purchase price of the property
  • Record of any personal property that the seller is planning to leave on the property
  • A signature from both parties


In real estate, a contingency is a condition that needs to be met in order for the contract to be finalized. This could be related to a home inspection or securing funding for a mortgage loan. A contingency clause allows the buyer and seller the opportunity to back out of the deal if one party fails to uphold their end of the bargain.

Custom terms

Every property is unique. If any custom terms to the agreement were discussed during negotiations, be sure to include them. A verbal agreement won’t mean much if the deal goes awry, so it's best to have everything in writing.

Related: Not only do you need things in writing, but you might also need someone to oversee the documents being signed. New laws allowing notaries to work remotely have made this process a breeze. 

Closing costs

Every real estate transaction will come with closing costs that both the buyer and seller will be held responsible for. These details should be clearly outlined in a purchase agreement. In most cases, the seller will be required to pay commission to the real estate agents and the buyer will cover the remaining closing costs such as escrow fees and any applicable property taxes.

TIP: This part of the purchase agreement should include details related to the earnest money deposit, which the buyer will pay to show they are serious about finalizing the sale.

Signed, sealed, and delivered

To make it official, both parties need to sign and date the contract in front of a witness. Drafting up purchase agreements for your clients might not be the most glamorous part of your job, but it’s a part of the closing process that can’t be overlooked. After all, the more contracts you’re working on, the closer you are to earning that next commission check.

In the digital age, shuffling through piles of paper to sign on the dotted line is quickly becoming a thing of the past. Consider investing in e-signature software to simplify the process of drafting and signing real estate documents for you and your clients.

See the Highest-Rated E-Signature Software →


The Real Estate Purchase Agreement, Explained A real estate purchase agreement is an important, and often complicated, document that every agent needs to be familiar with. Keep reading to learn all the key components of a formal purchase agreement
Izabelle Hundrev Izabelle is a Partner Marketing Specialist at InStride and a former content specialist at G2. Outside of work, she is passionate about all things pop culture, food, and travel. (she/her/hers)

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