What’s A Real Estate Purchase Agreement? (2026)

Understanding a Real Estate Purchase Agreement

A real estate purchase agreement is more than a sales contract. It outlines the terms of sale of a property, and those terms usually include certain contingencies.

In most cases, real estate purchase agreements are legally binding, but if a contingency isn’t met, one party may back out with no penalty. For example, many agreements have an inspection contingency. If the property fails inspection, the buyer may no longer be bound by the contract.

Who Prepares and Pays for the Contract?

It’s important to create a real estate purchase agreement before you enter into a transaction. But who’s responsible for creating the contract?

Most of the time, the real estate agent representing the buyer is the one who draws up the document. However, because they aren't attorneys, real estate agents may not create contracts from scratch. The buyer usually compensates the agent for the contract.

Key Components to Include

Most real estate contracts must include the following:

• Information on the buyer and seller
• Information on the property being sold
• The price and payment terms
• Any applicable contingencies
• Which party will purchase title insurance
• The closing date

The specifics of your contract will depend on the kind of real estate you’re purchasing. For instance, when you create a commercial real estate purchase agreement, it usually involves more details than a contract for purchasing a house.

Common Contingencies Explained

Common contingencies in real estate purchase agreements include:

• Inspection: If an inspection reveals defects, the buyer can back out.
• Financing: If a buyer can’t get financing, they can back out of the deal.
• Title: If a title search reveals liens or other problems, the buyer can cancel.
• Home Sale: If the buyer can't sell their existing home, they can back out of the current deal.

Usually, if a buyer backs out of the deal because a contingency wasn’t met, they can get their earnest money refunded.

Earnest Money and Closing Costs

Purchase agreements often require an earnest money deposit. This shows that the buyer is serious about the purchase. The deposit is usually held in escrow until the deal is finalized.

Your real estate purchase agreement should also say who must pay closing costs. Generally, closing costs are around 3% to 6% of the purchase price.

Need to Create a Real Estate Purchase Agreement?

The right real estate purchase agreement protects the interests of both buyers and sellers. When you have a clear agreement from the outset, you’re far less likely to encounter disputes and legal issues down the road.

ConsumerShield can help you select and create the right contract for your needs. Explore our library of legal document templates and guides today.