Real Estate

Understand Your Home Purchase Agreement Before You Sign

By Ilona Bray, J.D., University of Washington Law School
A home purchase agreement isn't just boilerplate, but includes many important decisions you'll want to make about price, timing, conditions to your closing the deal, and more.

When you find a house you'd like to buy, you'll want to present the seller with an offer to purchase the home.

The form of this offer depends on real estate practices followed in your state. It may be a very short document, which serves to open negotiations and will hopefully lead to a full contract later. Or, it may take the form of a complete contract, which the seller could simply sign in order to create a mutual binding contractual obligation.

Your real estate agent will likely have a standard purchase offer or purchase agreement form for your use. In some situations, or if you live in a state that requires attorney involvement in real estate transactions (as is the case in Alabama, New York, and North Carolina, for instance), you might want to hire a real estate lawyer to prepare or review the contract.

Real Estate Purchase Contract Clauses

The typical home purchase contract should include:

  • Property address and/or legal description.
  • Purchase price you're offering.
  • Amount of down payment (how much cash you will put down, if you're taking out a loan for the remainder).
  • A mortgage contingency provision, which allows you to be released from your offer if you're unable to obtain a loan in a specific amount at a specific interest rate within a specific amount of time (usually between 30 and 60 days).
  • Amount of earnest money deposit (confusingly referred to as a "downpayment" in New York state).
  • How long the offer will be open. You can limit the seller to not more than 48 hours to respond to your offer, to keep the seller from waiting for better bids from other buyers. (Of course, if the seller came back to you later, you might still want to accept.)
  • The date the sale will be finalized ("closed").
  • The date you'll be able to move in ("take possession"). In some situations, you and the seller might negotiate to let the seller rent the house back from you beyond the closing date, especially if the seller hasn't yet bought another house.
  • Who will hold the earnest or deposit money (usually an escrow or title agent) and who will be the closing agent and/or escrow or title agent for the closing.
  • Items to be included in the sale, such as carpeting, lighting fixtures, appliances, and so forth.
  • Items not included in the sale (but which you might have thought would be included).
  • A guarantee from the seller that he or she will provide clear title to the home, through an abstract of title, certificate of title, or a title insurance policy.
  • A provision stating that the seller is responsible for paying utility bills, property taxes, insurance, and other house-related expenses through the closing date.
  • An inspection-contingency clause, which allows you, the buyer, to have the home inspected by a professional inspector, usually within a few days of the date of signing the contract. This provision should make your purchase offer contingent on a satisfactory inspection report.
  • Language that details when you can do a walk-through inspection, usually a day or two before the closing date, in order to make sure everything is ready, according to the guarantees made in the contract; in other words, that the place is reasonably clean, the seller has moved out, and the seller hasn't taken property that was supposed to stay behind.
  • A provision requiring the seller to pay a certain amount of money for every day beyond the date of your occupancy that the house is not available for you to move into (often called a "liquidated damages clause").
  • A clause making the offer contingent on you selling your current house, if you'll need to do that before you can move.
  • Language that requires the canceling of the deal (and return of your earnest money deposit) if the sale isn't completed due to other contingencies not having been fulfilled (for example, if you've made the deal contingent on checking out local crime rates or obtaining homeowners' insurance on the house).

Even with a standard form contract, you should be able to cross portions out, insert addendums, or customize the contract to your (and the seller's) needs.


A seller isn't required to accept any particular offer; not even if it's at the full asking or list price.

The seller will usually respond to a buyer's offer with a counteroffer that accepts some of the terms but proposes changes to others.

Common counteroffer proposals include:

  • A higher purchase price.
  • A reduction of the time the buyer has in which to remove contingencies, such as the inspection contingency and one that conditions the deal on selling your current home.
  • Removing certain contingencies altogether.
  • Excluding certain items from the sale, such as the seller's antique heirloom chandelier.
  • More time for the seller to vacate the house after the sale is closed.
  • That the seller's attorney approve the contract as a contingency of the sale (if the seller hasn't had the time to have an attorney review the agreement).
  • A "liquidated damages clause," which details how much money you'll owe to the seller if you back out of the deal for reasons other than the contingencies listed in the contract. In some states, laws limit your liquidated damages to the amount of the earnest money deposit or to a percentage of the purchase price (as in Washington State and California).


If the buyer is not satisfied with the seller's counteroffer, the buyer can reject the counteroffer and submit additional changes in a buyer's counteroffer. The parties can negotiate the terms of the contract until they reach an agreement.

Role of Brokers

If the seller or the buyer is using a real estate broker, the broker or brokers usually negotiate the terms and conditions of the contract, as directed by their clients. However, the final decisions are made by the seller and the buyer, and they both must sign the purchase agreement or contract of sale.

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