Purchase Agreement

What is a purchase agreement?

When something is purchased at a store, the customer pays, takes the item, and receives a receipt. A purchase agreement can be signed for transactions that involve more than swiping a card at the register.

Also known as a sales contract, purchase contract, or a purchase and sale agreement, a purchase agreement is signed by both buyer and seller before money and goods are exchanged. It is often used in real estate and business transactions. 

In most real estate transactions, a loan has to be processed, and a large sum of money has to move from bank to bank. If a company purchases new furniture for the whole building, manufacturing or delivering the goods can take time. In both cases, a purchase agreement protects both the buyer and the seller while the transaction is processed. If either party fails to meet the terms of the purchase agreement, they are subject to legal action.

Key components of a rental agreement include the sale price, the date the purchase will be paid in full, the date the goods will be delivered or title transferred, and closing costs. It may also include details about title insurance and contingencies. As a show of good faith, the buyer can also pay a portion of the full purchase price in the form of a down payment or earnest money deposit with the purchase agreement. 

Learn more about how to use a purchase agreement.

FAQs 

What happens after signing a purchase agreement?

After a buyer and seller sign a purchase agreement, they work with the banks, title companies, manufacturers, or any other relevant parties to complete the purchase by the designated closing date. 

How long is a purchase agreement good for?

The expiration date of a purchase agreement is set by the buyer and seller. In real estate, the closing date is usually within 90 days, but that can be negotiated. In an agreement that involves manufacturing and delivering goods, the date can be set to allow adequate time. The important thing is that the buyer and seller agree. 

What's the difference between a purchase agreement and a purchase order?

A purchase order is an offer to purchase goods from a seller. If the seller accepts the offer, they can sign the purchase order or supply the goods, but there is no legal obligation to do so. A purchase agreement is a legally binding contract between a buyer and seller to purchase goods or real estate.

What are some common contingencies in a purchase agreement?

The buyer and seller both have the right to list contingencies in the purchase agreement. If the contingencies are not met, either party can back out of the deal. Common contingencies in a real estate purchase agreement include home inspection, appraisal, and financing. 

Who writes a real estate purchase agreement?

Your real estate agent typically drafts the purchase agreement. In some cases or states, a real estate attorney may also be involved.