What are the best practices for drafting a purchase agreement vs a sales contract?

1 Purchase agreement basics

A purchase agreement is a written contract that specifies the price, contingencies, closing date, and other details of a real estate transaction. It is usually prepared by the buyer or the buyer's agent, and presented to the seller or the seller's agent for acceptance. A purchase agreement is not a final sale, but a binding offer that can be accepted, rejected, or countered by the seller. Once both parties agree on the terms and sign the purchase agreement, it becomes a valid contract that can only be canceled or modified by mutual consent or by the occurrence of a contingency.

2 Sales contract basics

A sales contract is a similar document to a purchase agreement, but it is used in some states instead of or in addition to a purchase agreement. A sales contract is also a written contract that outlines the terms and conditions of a real estate transaction, but it is usually prepared by the seller or the seller's agent, and presented to the buyer or the buyer's agent for acceptance. A sales contract is also a binding offer that can be accepted, rejected, or countered by the buyer. However, a sales contract may also include a provision that allows the seller to continue marketing the property and accept other offers until the buyer fulfills certain conditions, such as obtaining financing or conducting inspections.

3 Differences between purchase agreements and sales contracts

The main difference between purchase agreements and sales contracts is the order and timing of the offer and acceptance process. In a purchase agreement, the buyer makes the first offer and the seller responds, while in a sales contract, the seller makes the first offer and the buyer responds. Additionally, a purchase agreement usually becomes a final contract once both parties sign it, while a sales contract may allow the seller to accept other offers until the buyer meets certain requirements. However, these differences may vary depending on the state laws and the specific terms of the contract.

4 Best practices for drafting a purchase agreement or a sales contract

When using a purchase agreement or sales contract, it is important to follow best practices to ensure the contract is clear, comprehensive, and enforceable. Start by using a standard form or template that complies with state laws and regulations, and consult a real estate attorney or agent if you have any questions or concerns. Make sure to include all essential information, such as the names and contact details of the parties, the legal description and address of the property, the purchase price and earnest money deposit, the closing date and costs, and the contingencies and disclosures. Be specific and detailed about the terms and conditions, such as the financing, inspection, appraisal, title, and warranty clauses, and avoid vague or ambiguous language. Review and verify the accuracy of the information, and make sure both parties understand and agree on the contract before signing it. Keep a copy of the signed contract and any amendments or addenda, and follow up on the progress and completion of the contingencies and obligations.