Buying or selling any property is a very important process given the value of the transaction. Therefore, it is essential to know the steps to follow and to provide all the necessary documents—including the property purchase agreement itself—to avoid any problems.

At Culmia, we’d like to provide you with some details about this legal document. We encourage you to keep reading this article to learn what a home purchase agreement is, what types exist, and what elements are included in its structure. Will you join us?

What is a home purchase agreement?

This document sets forth the terms and conditions governing the sale of a house, as it defines, among other things, its location, size, price, and payment terms. Therefore, it is a legal agreement regarding the sale of real property.

Since this is a purchase and sale transaction, the parties involved in this process are the seller and the buyer. Thus, the seller—whether an individual or a legal entity (such as an institution or a corporation)— agrees to transfer the property—to sell —once the buyer has made the previously agreed-upon payment .

As for the functions of a home purchase agreement, this legal document establishes the obligations of both parties—the buyer and the seller; and therefore also serves as a safeguard for either party in the event of any breach of its terms.

Types of Sales Contracts

Since there are several types, it is helpful to understand their specific characteristics and differences:

• Purchase Option Agreement: Under this type of agreement, one party (the grantor) grants the other party (the option holder) the right to decide whether or not to enter into another main sales contract.
• Deposit Agreement: This is a private agreement between a buyer and a seller in which both parties commit in advance to a future real estate sale, with the buyer paying a specified amount of the total purchase price, unlike a reservation agreement. Generally, the reservation contract cannot be rescinded, so a breach of it carries more serious legal consequences than a breach of the earnest money contract.
• Preliminary sales agreement: a legal commitment that establishes the terms and conditions for the future execution of the final contract.
• Public real estate purchase agreement: This is the legal document in which both parties—the buyer and the seller—sign before a notary to formalize the sale of the desired property. Thus, the presence of a notary public provides this legal procedure with greater security compared to a private sales contract.
• Private real estate purchase agreement: This is a bilateral legal document that sets forth in writing all the details of the two parties involved, as well as the terms of the transaction (the method of payment, the exact time of delivery of the property, and the final cost of the transaction).

Elements of a Sales Contract

This legal document consists of a series of elements and has a clear internal structure. Each element refers to a specific paragraph that defines the type of contract or the parties involved in the transaction. Additionally, other details may be included, such as the date the contract was executed. The various elements are:

• Declarations: This is the section of the contract that identifies the legal parties involved in the transaction, along with their personal and institutional information, thereby establishing ownership of the house being sold.
• Clauses : These specify the agreements that will govern both parties, as well as the terms of the transaction. These aspects should include the price, payment method, house specifications, and the obligations of both parties in case one of them fails to fulfill their obligations.
• Signatures and Attachments: It is absolutely necessary to have the signatures of both parties. Therefore, written records must be kept of both their full names and their thumbprints and signatures. This signing process must be repeated on each page of the contract.

The process of buying or selling real estate can be difficult and time-consuming. For this reason, as we have just seen, it is always a good idea to be thoroughly familiar with the steps involved in properly executing this type of contract and completing the transaction in accordance with the law.

You might be interested in:

• Housing Reservation Agreement: What It Is and Types of Documents
• How to Buy a Home Successfully | Follow These Simple Steps