When buying or selling any type of personal property, there are multiple factors that must be determined before the transaction can be completed. The most obvious factors are the condition of the property or item and the purchase price.
However, depending on the type of purchased item and the complexity of the transaction, the parties can decide to include additional elements, such as guarantees, the method and dynamics of the purchase price payment, and more.
All of these details provide transparency and security for the seller and buyer and make the transaction more secure.
What is a Purchase Agreement?
A purchase agreement is a legal document that outlines the terms and conditions of a property transaction.
Although the purchase and sales agreement itself doesn’t transfer any legal rights between the parties, it outlines the conditions under which each party agrees to complete the transaction, which prevents potential misunderstandings and disputes between them.
The purchase and sales agreement should be used for selling or buying any item or property of higher value. That includes real estate, motor vehicles, trailers, businesses, and more.
For more complex transactions where there are many factors affecting the sale and purchase of the property, the parties should use the purchase agreement regardless of the purchase price.
The Difference Between a Purchase Agreement and Bill of Sale
Although both the purchase agreement and the bill of sale are connected with the process of sale and purchase, they are used for different purposes.
The purchase agreement is a document that outlines the conditions of the property transfer and is usually used during the negotiation process.
The bill of sale is a document used as proof of the ownership transfer between the seller and the buyer, and it is usually used after the purchase agreement has been executed.
Purchase Agreement Forms By State
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
Purchase Agreement Types
Based on the type of property you are buying or selling, there are different types of purchase agreement templates you can use:
Variety of Purchase Agreement
Residential real estate purchase agreement. The seller and buyer can use it to transfer an apartment, house, or any other type of real estate used for residential purposes. It is also called the “purchase agreement for the house.”
Commercial real estate purchase agreement. Parties can use it to sell and purchase office space and other types of real estate used for commercial purposes.
Land purchase agreement. Contains all the necessary terms and conditions used for the sale and purchase of land.
Motor vehicle purchase agreement. Sellers and buyers can use it to transfer cars, motorcycles, trucks, and other kinds of motor vehicles.
Business purchase agreement. Used for outlining the terms and conditions of the company share transfer.
When is a Purchase Agreement Form Used?
The parties would usually use the purchase agreement to secure their interests in the transaction for the more valuable property. The general rule of thumb is that the parties should use the purchase agreement for any item with a purchase price of over $500.
Also, regardless of the purchase price, if the parties need to determine many factors that will affect the property transfer, they should draft and sign the purchase agreement. This will formalize their negotiation process and prevent potential misunderstandings.
Traditionally, real estate transfers are complex in nature, and the parties should always use the purchase agreement to conclude their negotiation process, regardless of the type of real estate they are transferring.
What Information Should Be Included in a Purchase Agreement?
Every purchase agreement, regardless of the type of transferred item, should include the following:
Mandatory Details in Purchase Agreement
Information about the buyer and seller. This usually includes their full names and mailing addresses.
Description of the item. It should include all the necessary information that individualizes the transferred item, like the size, color, serial number, and more.
Purchase price. Includes the amount of money the buyer needs to transfer to the seller, as well as the method of payment and eventual installments or trade-in arrangements, if applicable.
Contingencies. This includes financing, appraisals, inspections, and more.
Disclosures. The parties can outline all the flaws, defects, and potential issues with the transferred item.
Governing law. Here, the parties can provide the laws that they can refer to when interpreting the provisions of the sales agreement.
Sale date and signatures. At the end of the document, the parties should provide the sale date and their signatures.
How to Fill out a Purchase Agreement
The easiest way to create the purchase agreement is to use our professionally designed purchase agreement builder.
Below, you can see a step-by-step process for how to fill out the information in the builder and get your purchase agreement sample:
Step 1 - Insert Buyer & Seller Information
Here, you should enter the full names and mailing addresses of the seller and buyer. Additionally, you can enter other relevant information that will identify the parties more closely.
Step 2 - List the Items Being Sold
Secondly, you should provide a list of items that are the object of the purchase agreement. Each item should be described in detail, which often includes providing the item’s size, color, and serial number, as well as describing any damages that the item might have.
Step 3 - Write the Purchase Price & Payment Details
In this section, you should enter the purchase price of the item and, if applicable, provide any additional terms of the purchase price payment.
Step 4 - List the Payment Terms
This can refer to the method of payment, payment of the purchase price in installments, and more.
Step 5 - Sign the Purchase Agreement
After completing all the sections in the form, you should download the purchase agreement PDF, print it, and include the seller’s and buyer's signatures on the document.
Purchase Agreement FAQ
A seller can back out of the purchase agreement in cases where the buyer breaches the agreement or the contingencies set out in the agreement, or when the seller and buyer mutually agree to terminate the agreement.
A buyer can back out of the purchase agreement under similar conditions as the seller. This includes situations where the seller violates the terms of the agreement or doesn’t meet the provided contingencies, as well as if both parties mutually agree to terminate the agreement.
The purchase agreement is legally binding from the moment both parties, who have the legal capacity to enter into such an agreement, sign the partnership agreement.
The purpose of a purchase agreement is to provide legal backing to the seller and buyer and formalize their negotiation process by outlining all the terms and conditions of the sale and purchase of a certain item.
You need a purchase agreement for mortgage pre-approval because the lender can use the purchase agreement to see what the property’s purchase price that the seller and buyer have agreed upon is.
In real estate, a purchase agreement is a legal document that provides all the details the seller and buyer have previously agreed upon in connection with the sale and purchase of a certain property.
No, the purchase agreement and deed are not the same. The purchase agreement is a document that outlines the terms and conditions of the transaction before the actual ownership transfer, and the deed is a document that transfers property ownership.
The purchase agreement and the sales contract generally refer to the same type of document. They both include important details about the sale and purchase of a certain item or property.