How to Draft a Purchase and Sale Agreement
Format the document., Insert a title., Identify the parties to the sale., Add the legal description of property., State the purchase price., Identify any earnest money deposited., Describe the financing., List items included in the sale., Identify...
Step-by-Step Guide
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Step 1: Format the document.
You should type up the purchase and sale agreement so that it is legible.
You don’t want the other side to claim that you hid information using small fonts, so set the font to a readable size and style.
Times New Roman 12 point works for many people.
If you are going to use your sale and purchase agreement more than once, then set it up as a template.
Include blank lines for information that will change from contract to contract, such as the name of the purchaser and the purchase price. -
Step 2: Insert a title.
At the top of the page, you should center the title between the left- and right-hand margins.
Title your document something like “Purchase and Sale Agreement” or “Agreement to Purchase Real Estate.”, You need to identify the purchaser and the seller at the start of your agreement.
You could include blank lines for their names or insert a brief paragraph like the following: “(‘Purchaser’), offers and agrees to purchase from (‘Seller’), upon the terms and conditions set forth herein, the property legally described as .”, You need to accurately describe the property in your agreement, so find the legal description of property, which is on the deed.
You can get a copy of the deed at your county’s Recorder of Deeds office.
See Get a Legal Description of Property for more information. , You can write: “The purchase price shall be .
After earnest money is credited, the remaining balance shall be paid by Purchaser at closing.”, Earnest money is a form of security deposit.
It is how you show the seller that you are serious about buying the property.
Without depositing earnest money, a potential buyer could claim to be interested in any number of homes, effectively removing them from the market.You should include a clause describing the amount of earnest money to be deposited and the deadline for depositing it.
Sample language could read: “Earnest money in the amount of shall be paid to the Escrow Agent, , in the form of check or money order.
Purchaser shall deliver payment to Escrow Agent no later than 5:30 pm, five (5) calendar days after Seller’s acceptance of this agreement.”You should also clarify that the earnest money will be credited to the purchase price. , You need to identify the purchaser’s source of financing and ask for proof that they qualify for the financing.
Generally, sufficient proof will be a letter from the purchaser’s bank or lender.
For example, if the buyer is using cash, then include the following: “This is a cash offer.
The balance of the purchase price will be paid at closing by certified check.” You can also ask that the purchaser include a verification letter stating that funds are available.
If the purchaser is getting a loan, then identify the loan type (e.g., VA, FHA, conventional, etc.) Also ask for a letter about the loan status and give a deadline for receiving the letter. , A home may come with personal property inside or “fixtures.” Fixtures are improvements made on the property that cannot be removed, such as bookshelves installed in the wall or a fireplace.
You should identify any fixtures or items that will be sold with the property, such as:wall-to-wall carpeting attached light fixtures and bulbs attached mirrors heating and cooling equipment plumbing fixtures ceiling fans doors windows, screens, and storm windows built-in kitchen appliances security systems window treatments awnings fencing , If there is anything the seller is taking with them, then be sure to list it in the purchase and sale agreement.
For example, you might want to take your kitchen appliances with you.
If so, be sure to list them.
Also identify any leased items in the house.The purchaser needs to know that you don’t own them. , This is an important provision.
It is often unrealistic to expect someone to purchase a home if they can’t sell their current home.
By including this provision, the purchaser can get out of the purchase if they can’t sell their home.
Alternately, the offer might not be contingent on the buyer selling their home.
Either way, explain the situation:“This offer is contingent upon the sale and close of Purchaser’s property located at within days.” “This offer is not contingent upon the sale or close of property owned by Purchaser.” , Generally, the seller needs to pay any existing loans or liens.
Also, the seller pays real estate commissions, title insurance policy with the buyer to receive benefit, and the balance on any leased items that remain on the property.
The seller shall also transfer any existing rental or lease deposits to the purchaser at closing., The buyer can pay the deed and deed of trust recording fees, association transfer fees, transfer taxes, insurance (hazard and other), purchaser’s settlement fees, and its own loan expenses., The house might sell in the middle of the tax year.
Accordingly, you might want to prorate the taxes.
You should explain whether taxes will be prorated and what the proration will be based on.
For example, you can base the proration on the previous year’s taxes, an agreed upon amount, or the most current county information., An inspection is a standard part of any home purchase.
You should include a clause where the purchaser acknowledges that he or she has been advised to have the home inspected.
Sample language could read: “Purchaser acknowledges that it has been recommended that Purchaser hire, at Purchaser’s own expense, the services of a professional inspector to inspect the property.” You can then include a space for the purchaser to initial., Sometimes the purchaser will want the added protection of getting an inspection before finalizing the agreement.
If so, you should state that the sale is contingent on the property inspection.
You could write, “This offer is contingent upon Purchaser, at Purchaser’s expense, obtaining a property inspection and reports.
The inspection may include the structural, mechanical, pest, and physical conditions relating to the property.
Written notice shall be provided to Seller or Seller’s agent within five business days of acceptance of this agreement.”The purchaser may also waive the inspection.
If so, include a line for the purchaser to initial their agreement to waive inspection. , You might get back a bad inspection report.
In this situation, the purchaser might not to want to go through with the sale as is.
Accordingly, you should explain options that each side can take:
The purchaser could accept the condition.
The seller could correct the condition and provide an inspector’s certification that the condition has been corrected.
The purchaser and seller will negotiate a settlement.
The seller does nothing and the agreement becomes null and void within a certain number of days after the seller receives the inspection reports. , You can include a provision where the buyer acknowledges that he or she has been advised to have a survey performed.
If the purchaser decides to waive a survey, then you can include that information.
Ask the purchaser to place their initials beside any waiver., A “representation” is a statement of fact which the seller warrants is true at the time of contracting.
If the fact turns out to be false, then the buyer can usually cancel the contract or sue.
You should list the seller’s representations.
The following are typical representations:there are no violations of zoning, fire, or building codes the building is not in a floodplain or a Special Flood Hazard Area there are no boundary line disputes there are no violations of setback lines, easements, or property boundary lines , Generally, the seller will transfer a general warranty deed to the purchaser.
With a warranty deed, the seller is basically promising that they are the rightful owner of the property and that they have the right to transfer title.
They also warrant that no one has a better claim to title.
If these promises are false, then the buyer can sue for compensation.Sample language could read: “Seller will convey to Purchaser good and marketable title by a valid general warranty deed.”, The building might burn down between the date you sign a contract and the date you actually close.
Who bears the risk? With a risk of loss provision, you can explain who bears the risk of an accident.
A sample clause could read: “Seller is responsible for any loss or damage to the property before closing.”, If there is a dispute between the two parties, then they may end up in court.
However, you can also choose ahead of time to resolve your dispute using mediation.
You should include an agreement to mediate in the purchase and sale agreement.
Sample language could read: “Any dispute arising out of, or relating to, this agreement will be submitted to a private mediation service.
Any cost of mediation will be shared equally between Seller and Purchaser.”, The offer to sell doesn’t last indefinitely.
Instead, there is usually a deadline for acceptance.
There is also a deadline for closing.
You should include these dates in your purchase and sale agreement.
For example, you could write: “This offer is void if not accepted by Seller in writing on or before .
Closing of the sale shall take place after Purchaser’s receipt of an abstract showing marketable title in Seller or title insurance binder showing insurable title in Seller.
This offer is made at this .”Insert a signature line for the purchaser beneath this statement. , You also need a provision where the seller explicitly states that it agrees to the contract.
If the seller needs to pay a brokerage fee, then include that information here.
Sample language could read: “The foregoing offer to purchase real estate is hereby accepted in accordance with the terms and conditions specified above.
The undersigned hereby agrees to pay a brokerage fee of to in accordance with the existing listing contract.” Then insert the date and a line for the seller’s signature., This article describes a basic purchase and sale agreement.
Your needs may vary.
To understand if anything is missing, you should show your draft to a qualified real estate attorney.
You can find a real estate attorney by contacting your local or state bar association and getting a referral.Once you have the name of someone, call and schedule a meeting.
Ask ahead of time how much the attorney charges. -
Step 3: Identify the parties to the sale.
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Step 4: Add the legal description of property.
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Step 5: State the purchase price.
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Step 6: Identify any earnest money deposited.
-
Step 7: Describe the financing.
-
Step 8: List items included in the sale.
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Step 9: Identify items not included in the sale.
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Step 10: State whether the sale is conditioned on the buyer selling their home.
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Step 11: State what closing costs the seller must pay.
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Step 12: Explain what closing costs the buyer must pay.
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Step 13: Explain who pays the taxes.
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Step 14: Warn the buyer to get an Inspection.
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Step 15: State whether the sale is contingent on an inspection.
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Step 16: Identify options if the inspection is unsatisfactory.
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Step 17: Recommend that the purchaser get a survey.
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Step 18: List the seller’s representations.
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Step 19: Describe the deed conveyed.
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Step 20: Describe how “risk of loss” passes.
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Step 21: Include a dispute resolution clause.
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Step 22: Identify the time for acceptance and closing.
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Step 23: Add the acceptance by seller.
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Step 24: Show your draft agreement to an attorney.
Detailed Guide
You should type up the purchase and sale agreement so that it is legible.
You don’t want the other side to claim that you hid information using small fonts, so set the font to a readable size and style.
Times New Roman 12 point works for many people.
If you are going to use your sale and purchase agreement more than once, then set it up as a template.
Include blank lines for information that will change from contract to contract, such as the name of the purchaser and the purchase price.
At the top of the page, you should center the title between the left- and right-hand margins.
Title your document something like “Purchase and Sale Agreement” or “Agreement to Purchase Real Estate.”, You need to identify the purchaser and the seller at the start of your agreement.
You could include blank lines for their names or insert a brief paragraph like the following: “(‘Purchaser’), offers and agrees to purchase from (‘Seller’), upon the terms and conditions set forth herein, the property legally described as .”, You need to accurately describe the property in your agreement, so find the legal description of property, which is on the deed.
You can get a copy of the deed at your county’s Recorder of Deeds office.
See Get a Legal Description of Property for more information. , You can write: “The purchase price shall be .
After earnest money is credited, the remaining balance shall be paid by Purchaser at closing.”, Earnest money is a form of security deposit.
It is how you show the seller that you are serious about buying the property.
Without depositing earnest money, a potential buyer could claim to be interested in any number of homes, effectively removing them from the market.You should include a clause describing the amount of earnest money to be deposited and the deadline for depositing it.
Sample language could read: “Earnest money in the amount of shall be paid to the Escrow Agent, , in the form of check or money order.
Purchaser shall deliver payment to Escrow Agent no later than 5:30 pm, five (5) calendar days after Seller’s acceptance of this agreement.”You should also clarify that the earnest money will be credited to the purchase price. , You need to identify the purchaser’s source of financing and ask for proof that they qualify for the financing.
Generally, sufficient proof will be a letter from the purchaser’s bank or lender.
For example, if the buyer is using cash, then include the following: “This is a cash offer.
The balance of the purchase price will be paid at closing by certified check.” You can also ask that the purchaser include a verification letter stating that funds are available.
If the purchaser is getting a loan, then identify the loan type (e.g., VA, FHA, conventional, etc.) Also ask for a letter about the loan status and give a deadline for receiving the letter. , A home may come with personal property inside or “fixtures.” Fixtures are improvements made on the property that cannot be removed, such as bookshelves installed in the wall or a fireplace.
You should identify any fixtures or items that will be sold with the property, such as:wall-to-wall carpeting attached light fixtures and bulbs attached mirrors heating and cooling equipment plumbing fixtures ceiling fans doors windows, screens, and storm windows built-in kitchen appliances security systems window treatments awnings fencing , If there is anything the seller is taking with them, then be sure to list it in the purchase and sale agreement.
For example, you might want to take your kitchen appliances with you.
If so, be sure to list them.
Also identify any leased items in the house.The purchaser needs to know that you don’t own them. , This is an important provision.
It is often unrealistic to expect someone to purchase a home if they can’t sell their current home.
By including this provision, the purchaser can get out of the purchase if they can’t sell their home.
Alternately, the offer might not be contingent on the buyer selling their home.
Either way, explain the situation:“This offer is contingent upon the sale and close of Purchaser’s property located at within days.” “This offer is not contingent upon the sale or close of property owned by Purchaser.” , Generally, the seller needs to pay any existing loans or liens.
Also, the seller pays real estate commissions, title insurance policy with the buyer to receive benefit, and the balance on any leased items that remain on the property.
The seller shall also transfer any existing rental or lease deposits to the purchaser at closing., The buyer can pay the deed and deed of trust recording fees, association transfer fees, transfer taxes, insurance (hazard and other), purchaser’s settlement fees, and its own loan expenses., The house might sell in the middle of the tax year.
Accordingly, you might want to prorate the taxes.
You should explain whether taxes will be prorated and what the proration will be based on.
For example, you can base the proration on the previous year’s taxes, an agreed upon amount, or the most current county information., An inspection is a standard part of any home purchase.
You should include a clause where the purchaser acknowledges that he or she has been advised to have the home inspected.
Sample language could read: “Purchaser acknowledges that it has been recommended that Purchaser hire, at Purchaser’s own expense, the services of a professional inspector to inspect the property.” You can then include a space for the purchaser to initial., Sometimes the purchaser will want the added protection of getting an inspection before finalizing the agreement.
If so, you should state that the sale is contingent on the property inspection.
You could write, “This offer is contingent upon Purchaser, at Purchaser’s expense, obtaining a property inspection and reports.
The inspection may include the structural, mechanical, pest, and physical conditions relating to the property.
Written notice shall be provided to Seller or Seller’s agent within five business days of acceptance of this agreement.”The purchaser may also waive the inspection.
If so, include a line for the purchaser to initial their agreement to waive inspection. , You might get back a bad inspection report.
In this situation, the purchaser might not to want to go through with the sale as is.
Accordingly, you should explain options that each side can take:
The purchaser could accept the condition.
The seller could correct the condition and provide an inspector’s certification that the condition has been corrected.
The purchaser and seller will negotiate a settlement.
The seller does nothing and the agreement becomes null and void within a certain number of days after the seller receives the inspection reports. , You can include a provision where the buyer acknowledges that he or she has been advised to have a survey performed.
If the purchaser decides to waive a survey, then you can include that information.
Ask the purchaser to place their initials beside any waiver., A “representation” is a statement of fact which the seller warrants is true at the time of contracting.
If the fact turns out to be false, then the buyer can usually cancel the contract or sue.
You should list the seller’s representations.
The following are typical representations:there are no violations of zoning, fire, or building codes the building is not in a floodplain or a Special Flood Hazard Area there are no boundary line disputes there are no violations of setback lines, easements, or property boundary lines , Generally, the seller will transfer a general warranty deed to the purchaser.
With a warranty deed, the seller is basically promising that they are the rightful owner of the property and that they have the right to transfer title.
They also warrant that no one has a better claim to title.
If these promises are false, then the buyer can sue for compensation.Sample language could read: “Seller will convey to Purchaser good and marketable title by a valid general warranty deed.”, The building might burn down between the date you sign a contract and the date you actually close.
Who bears the risk? With a risk of loss provision, you can explain who bears the risk of an accident.
A sample clause could read: “Seller is responsible for any loss or damage to the property before closing.”, If there is a dispute between the two parties, then they may end up in court.
However, you can also choose ahead of time to resolve your dispute using mediation.
You should include an agreement to mediate in the purchase and sale agreement.
Sample language could read: “Any dispute arising out of, or relating to, this agreement will be submitted to a private mediation service.
Any cost of mediation will be shared equally between Seller and Purchaser.”, The offer to sell doesn’t last indefinitely.
Instead, there is usually a deadline for acceptance.
There is also a deadline for closing.
You should include these dates in your purchase and sale agreement.
For example, you could write: “This offer is void if not accepted by Seller in writing on or before .
Closing of the sale shall take place after Purchaser’s receipt of an abstract showing marketable title in Seller or title insurance binder showing insurable title in Seller.
This offer is made at this .”Insert a signature line for the purchaser beneath this statement. , You also need a provision where the seller explicitly states that it agrees to the contract.
If the seller needs to pay a brokerage fee, then include that information here.
Sample language could read: “The foregoing offer to purchase real estate is hereby accepted in accordance with the terms and conditions specified above.
The undersigned hereby agrees to pay a brokerage fee of to in accordance with the existing listing contract.” Then insert the date and a line for the seller’s signature., This article describes a basic purchase and sale agreement.
Your needs may vary.
To understand if anything is missing, you should show your draft to a qualified real estate attorney.
You can find a real estate attorney by contacting your local or state bar association and getting a referral.Once you have the name of someone, call and schedule a meeting.
Ask ahead of time how much the attorney charges.
About the Author
Dennis Moore
Dennis Moore has dedicated 11 years to mastering educational content. As a content creator, Dennis focuses on providing actionable tips and step-by-step guides.
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