Real Estate Purchase Agreement Information
Alternate Names:
A Real Estate Purchase Agreement is also known as a:
- Purchase and sale agreement
- Real estate contract
- House purchase agreement
What is a Real Estate Purchase Agreement?
A Real Estate Purchase Agreement sets out the terms of a residential property sale between a buyer and a seller.
Use LawDepot's Real Estate Purchase Agreement for private home sales in Alberta, British Columbia, or Ontario.
Who should use a Real Estate Purchase Agreement?
Potential buyers typically use a Real Estate Purchase Agreement to express interest in a residential property. With this agreement, a buyer (or the buyer's realtor) starts the purchase process with an offer for the seller to review.
After the seller reviews the offer, they can choose to accept it, deny it, negotiate a different price with the buyer, or negotiate other parts of the agreement with the buyer.
For instance, the buyer and seller could negotiate:
- The deposit amount
- The possession or closing date (when the seller moves out and the buyer moves in)
- Whether the sale includes certain fixtures (items that have been attached to the building or land and cannot be removed without damage, such as a garbage disposal)
- Whether the sale includes chattel (items that are moveable, such as appliances)
Essentially, the buyer and seller accept or counter terms in the Real Estate Purchase Agreement until either the agreement is voided or both parties come to a final consensus.
What is included in a Real Estate Purchase Agreement?
A Real Estate Purchase Agreement typically begins with basic information about the buyer and seller, as well as details about the residential property that is for sale.
The agreement also includes financing terms, such as:
- The deposit amount. A buyer will usually put a deposit (often called an earnest money deposit) toward the property in order to show that they are serious about completing the purchase.
- The purchase price being offered by the buyer. It's normal for a buyer and seller to negotiate a final purchase price, but generally the buyer makes the initial offer in a Real Estate Purchase Agreement.
- Applicable taxes. The sale price for a new residential property (where the buyer is the first owner) generally includes Harmonized Sales Tax (HST). However, if the buyer is purchasing a home that has been previously owned, then the sale price is typically exempt from HST.
How binding is a Real Estate Purchase Agreement?
Generally, a Real Estate Purchase Agreement only becomes a binding document once the buyer and seller agree to all of the terms and conditions in the agreement and the agreement proceeds into a sale.
Negotiations can be made between the buyer and seller to change, add, or remove terms in the agreement until both parties come to a consensus. If the buyer and seller don't wish to proceed because they don't agree, the Real Estate Purchase Agreement can be voided. The agreement can also be voided if the conditions that the buyer listed in it are not fulfilled.
For example:
- A financing condition that states the sale will only proceed if the buyer can get a mortgage
- An inspection condition that states the buyer gets to bring in an inspector to make sure the property is in good condition
- A title check to ensure that the title to the property is free and clear of encumbrances
Once all changes have been made to the agreement and both parties agree, some jurisdictions may also require that the agreement be notarized or witnessed in order to be valid.
How long is an offer in a Real Estate Purchase Agreement valid?
In Ontario, all offers must include a time period where the offer is irrevocable. The buyer sets the irrevocable time period, and it can be as short as the buyer wants. Valid offers typically range from hours to days, depending on the buyer and the real estate laws in the jurisdiction where the property is located.