Purchase Contract Review & Encompass Guide

What is a Purchase Contract?

A real estate purchase agreement is a legally binding agreement that governs the purchase and sale of a property. Made between a buyer and seller, it defines the terms of the transaction and the conditions under which a sale will occur.

A real estate purchase agreement spells out the terms under which a buyer and seller agree to engage in a real estate transaction. Signing a purchase agreement effectively places both the buyer and seller (as well as the property in question) “under contract.”

A binding legal agreement outlining key details of the home sale transaction, a real estate purchase agreement for a house may also be referred to as a real estate sales contract, home purchase agreement, real estate purchase contract or house purchase agreement.

Following any ongoing negotiations, which may occur in the form of counteroffers, both parties will sign the home purchase agreement when they’re satisfied with the terms of the agreement. At this time, both the for-sale property and any parties to the agreement (for example, the home buyer and seller) will be deemed “under contract.”

This contract signals the intent of all parties to engage in a home sale transaction and explains which conditions must be met for the sale to close and ownership of the property to transfer to the new buyer.

Components of a Real Estate Sales Contract

• Buyer and seller information: Full names and contact information for all buyers and sellers involved in the transaction.

• Property details: Information on the property’s address, a description of the property and any other pertinent details about it.

• Purchase price: The total agreed-upon selling price for the property, including any deposits or additional costs associated with the transaction.

• Representations and warranties: Statements of facts made by the seller about the condition, structure and composition of the property being sold (this information can be disclosed by the seller in a warranty deed).

• Financing: Specific details explaining how the buyer will be paying for the property, whether by borrowing a mortgage loan from a lender or assuming the seller’s existing mortgage.

• Fixtures and appliances: Any household appliances or wall-mounted items and fixtures that will be included or excluded in the sale of the real estate.

• Title insurance: A note specifying whether the buyer or seller will be responsible for purchasing title insurance to protect against potential discoverable defects in the property.

• Property taxes: Citations regarding any property taxes that will be imposed on the property being purchased.

• Closing date: As specified on your purchase agreement, the exact date on which the official transfer of title will occur – and the date and time the buyer will receive the keys to the property.

• Contingencies: Any conditions (such as repairs that have to be done by a certain date, or inspections that must be performed) that must be met before a sale of the property can go through.

• Earnest money: The terms of any earnest money security deposits that must be made to show the seller in good faith that the buyer is interested in purchasing the property.

• Option to terminate: A potential option for the buyer to back out of the deal and terminate the contract up until a certain time before closing.

• Lead-based paint disclosure: As required by law for any home built before 1978, information on the dangers of lead-based paint (this gives the buyer the opportunity to have an inspection performed if necessary).

• Signatures: Required of each party to finalize every purchase agreement.

Verify key components of the Purchase Contract

1. Verify data matches the Purchase Contract and Encompass

   1. Identifying information
   2. Key Dates
   3. Financials

      5. Additional inspections/warranties (e.g. Termite Inspection, Home Warranty, etc.)

   4. Contact Info

      1. Escrow Officer and Office contact info

      2. Title Officer and Office contact info
2. Verify all pages of the Purchase Contract, including Counters and Addendums, are in the file

3. Verify both buyer and seller parties have signed the contract at all required spots

Purchase Contract Samples

Arizona Contract

1. Buyers and Sellers Name

2. Subject Property Address

3. Purchase Price

4. Earnest Money Deposit (EMD)

5. Close of Escrow

6. Required initials

1. Loan Contingency – In this sample, the borrower must be conditionally approved at least 3 days prior to the Close of Escrow 2/19/2021.

1. Seller Concessions – In this sample, there is no Seller Concession given

2. Appraisal Contingency – In this sample, the buyer has 5 days after the appraisal is completed to cancel the contract

3. Buyer/Seller Paid Fees – This sample states the buyer is paying for the appraisal

4. Escrow Contact Information

1. Signatures/Initials Required

1. Buyer/Seller Paid Fees – This sample indicates the Home Warranty will be paid by buyer

2. Signatures/Initials Required

1. This is a section where the real estate agent can write in a variety of additional terms. The conditions must be read carefully and analyzed to see if there is information pertinent to our mortgage loan application.

1. Buyer’s Real Estate Agent Information

2. Seller’s Real Estate Agent Information

1. Addendums to the Purchase Contract can list a variety of additional or updated terms. The conditions must be read carefully and analyzed to see if there is information pertinent to our mortgage loan application.

California Contract

1. Buyer’s Name

2. Subject Property Address

3. Seller’s Real Estate Agent Information

4. Buyer’s Real Estate Agent Information

5. Purchase Price

6. Close of Escrow

7. Earnest Money Deposit (EMD)

8. Signature/Initials Required

1. Seller Credit/Concession

2. Loan Contingency

3. Appraisal Contingency

1. Escrow Fee & Owner’s Title Policy – Typically the seller pays for a portion of the Escrow Fee and typically pays for the entire Owner’s Title Policy. But always check the distribution.

2. Transfer Taxes – Typically the seller pays for all Transfer Taxes. But always check the distribution.

3. HOA Fees – These fees are not typically paid by buyer or seller. It varies.

4. TC (Transaction Coordinator for the real estate agent) – These fees are not typically paid by buyer or seller. It varies.

5. Home Warranty – These fees are not typically paid by buyer or seller. It varies.

1. Signatures/Initials Required

1. Buyer’s Real Estate Agent contact information

2. Seller’s Real Estate Agent contact information

1. Additional disclosure that pertains to fair housing laws. This generally has no relevance to a mortgage loan application.

1. Additional disclosure that pertains to the real estate agent’s relationship/interest. This generally has no relevance to a mortgage loan application.