What Is A Purchase Agreement And What Is It For? (2026)
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Reviewed By Adam Ramirez, J.D.
Editor
Summary
- Purchase agreements are legal contracts between buyers and sellers
- They outline the price, closing date and other elements of the sale
- They are legally binding and legally enforceable
Buying or selling real estate is often more involved than selling a car or other property. Buyers and sellers have their own responsibilities, and finalizing the sale can take time.
A purchase agreement helps hold each party legally accountable. But what is a purchase agreement exactly, and why does it matter?
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Understanding a Purchase Agreement
So what is a purchase agreement exactly? During the sale of residential real estate, commercial real estate or land, a purchase agreement is a contract between buyer and seller. It clearly outlines the terms of the sale, and it’s signed by both parties before closing.
Types of Purchase Agreements
These are some of the most common types of purchase agreements:
- Real Estate Purchase Agreement: This agreement deals with the sale of real estate in general. Create your real estate purchase agreement online.
- Commercial RE Purchase Agreement: When you create a commercial RE purchase agreement, you outline the terms of sale for commercial property, which are often complex.
- Land Purchase Agreement: These agreements are used for the sale of vacant or unimproved land. You can create a land purchase agreement in minutes.
Purchase agreements are often finalized after extensive negotiation, so it’s a good idea to ask an attorney to look over your agreement before you sign it.
Key Elements of a Purchase Contract
Common elements of purchase agreements include:
- Identification of the buyer and the seller
- A clear, detailed description of the property
- The purchase price and payment terms
- The closing date
- Contingencies, or conditions either party must meet for the sale to happen
- Legal disclosures about the property
- A breakdown of the closing costs
Both parties must sign the agreement for it to be effective.
Common Contingencies and Disclosures
Here are some common contingencies in real estate agreements:
- Financing: Lets the buyer back out if they can’t get a mortgage
- Home Inspection: Allows the buyer to request repairs if an inspection shows major issues
- Title: Makes the sale contingent on a clear title free of encumbrances
Common disclosures include:
- Hazards: Sellers must disclose mold, radon and other health hazards.
- Material Defects: Sellers must tell buyers about major problems, including plumbing and electrical issues.
- History: Sellers must disclose past insurance claims and other notable events.
If a buyer discovers that a seller failed to make a required disclosure, they may pursue legal action.
Who Uses Purchase Agreements?
Purchase agreements are technically between the buyer and seller of a property. However, real estate agents representing each party often have a hand in negotiating the contracts, and the agreements themselves are usually drawn up by real estate lawyers.
Why Purchase Agreements Matter Legally
What is a purchase agreement ultimately for? These agreements clearly outline the sale timeline and the responsibilities of each party, helping to eliminate confusion during the sales process. They also hold all parties accountable. If one fails to fulfill the contract, the other can take legal action.
Choosing the right kind of purchase agreement for your transaction can help protect everyone’s rights. If you aren’t sure what kind of purchase agreement is best, a real estate lawyer can help.
You can also find a wide selection of legal documents, forms, and templates at ConsumerShield.
