Last Updated May 15, 2024
What is a Real Estate Purchase Agreement?
A Real Estate Purchase Agreement sets out the terms of a residential property sale between a buyer and a seller.
Prospective buyers (or their agents) can submit this document as an offer to a seller, who may then negotiate terms before signing and accepting the deal. However, for a less comprehensive contract that’s better suited for back-and-forth negotiations, you can also use LawDepot’s Offer to Purchase Real Estate.
You can use LawDepot's Real Estate Purchase Agreement for private home sales in Alberta, British Columbia, or Ontario.
A Real Estate Purchase Agreement is also known as a:
- Purchase and sale agreement
- Real estate contract
- House purchase agreement
Who needs a Real Estate Purchase Agreement?
Potential buyers typically use a Real Estate Purchase Agreement to express interest in a residential property. With this agreement, a buyer (or the buyer's realtor) starts the purchase process with an offer for the seller to review.
Use a Real Estate Purchase Agreement for any type of residential property sale, including previously owned homes or newly built homes (where construction is complete before the contract’s closing date).
You can use a Real Estate Purchase Agreement when:
- You’re a real estate agent representing a client
- The transaction is between family members
- The seller finances the buyer’s purchase
- You’re conducting a private sale
LawDepot’s Real Estate Purchase Agreement also contains terms for seller financing if needed.
How to write a Real Estate Purchase Agreement
1. Describe the property
First, state the type of property being sold. LawDepot’s template works for houses, condos, duplexes, mobile homes, manufactured homes, and other types of private property.
Of course, you’ll also need to include the property’s address and legal description. You can check your land title, tax assessments, or mortgage agreement for the legal description.
If applicable, you can also attach a property description with more details about the property (e.g., the number of bathrooms, bedrooms, etc.). You can also add descriptions of any furniture or fixtures (i.e., chattel) included in the sale.
Finally, it’s important to state the general condition of the property and any disclosures required by local laws. For example, property sales in Alberta, B.C., and Ontario must disclose whether the property has any material latent defects that make it dangerous or unfit for the buyer’s purposes.
The questionnaire for LawDepot’s Real Estate Purchase Agreement prompts you to include any disclosures that may apply to the property, including regulated disclosures in your selected province.
2. Provide party details
Include the full names, addresses, and phone numbers of both the buyer and the seller. You can add multiple buyers or sellers if needed.
3. State the terms of the sale
You’ll need to establish the purchase price and financing options. This includes details such as:
- The total purchase price (negotiable)
- The amount that the buyer will deposit
- When the deposit is due
- Who will hold the deposit until the end of the deal
- Where the buyer will get financing (e.g., bank, private lender, or the seller)
If applicable, you can place conditions on the sale. In this case, if a condition isn’t met, the buyer or seller may cancel the agreement. For example, property sales are often contingent on:
- Finance approval
- The sale of another property
- A satisfactory home inspection
- A title check that is free of encumbrances
Finally, state the last day for the buyer to examine the property title. A title search will reveal any issues that could affect the buyer’s title to the property.
4. Add final details
Choose a closing date for the sale to become final. You can also specify whether the buyer will take possession on this date or if they’ll temporarily lease the property.
You might also want to outline a method for resolving disputes if any arise. If so, you can use LawDepot’s template to add a clause with the steps you should take to find a solution (i.e., mediation and arbitration). You can also specify who should pay for any associated legal costs.
Finally, decide whether the buyer will have the option to terminate the contract after signing it. In this case, the buyer can terminate the agreement for any reason as long as they pay a termination fee. This is typically an amount that can be credited to the purchase price of the property when closing the deal.
How long is a Real Estate Purchase Agreement valid?
A buyer and seller can negotiate to change, add, or remove terms in their Real Estate Purchase Agreement until they come to a consensus.
If the buyer and seller can’t agree, the Real Estate Purchase Agreement can be voided. The agreement can also be voided if any conditions are not fulfilled.
How to cancel a Real Estate Purchase Agreement
You can cancel a Real Estate Purchase Agreement by notifying the other party in writing as to why you can’t proceed with the contract. Valid reasons for cancelling a contract include:
- Invoking the option to terminate clause
- Failing to meet the conditions of the contract
- Failing to disclose facts about the property as required by law
Provincial laws may vary when it comes to real estate purchases. As such, it’s important to consult a lawyer or refer to your local laws for further clarification.
