Purchase Agreement: Definition, What's Included
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A purchase agreement, also known as a real estate purchase agreement and purchase and sales agreement, is a legal instrument between two or more parties for the purchase and transfer of an asset, which is typically a residential, commercial, or industrial property. The general rule of thumb on these documents is that you use a purchase agreement when the transaction exceeds $500. However, a purchase agreement may also be necessary for transactions that do not exceed $500, depending on the jurisdiction and the type of transaction.
What Is A Purchase Agreement?
A purchase agreement formalizes the details of an asset purchase. A purchase agreement establishes the terms and conditions of the transaction, including price, limitations, legal disputes, and contract governance. They can be signed digitally or using ink and entered into by all parties’ free will in the transaction.
When Is A Purchase Agreement Needed?
There are several types of purchase agreements. They can be used for the purchase and sale of almost any kind of asset. However, they are most commonly used for large transactions that exceed the normal scope of business.
For example, a business may sell computers to consumers that cost $1,000. A receipt is typically issued for this transaction since the implications of the sale, price, and limitations are different from that of a large asset or real estate purchase.
A buyer or seller may use a purchase agreement to facilitate the following types of transactions:
- Sale or purchase of real estate
- Large volume purchases
- Used equipment purchases
- Mutual preference sales
- Motor vehicle purchases
- And more
In general, it is wise to hire transactional lawyers to help you draft the first iteration of the purchase agreements, which can also make modifications during the negotiation process. This strategy prevents legal mistakes from being made while remaining compliant with the governing local, state, and federal laws.
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What Happens After Signing A Purchase Agreement?
After signing a purchase agreement, you then finalize the sale. How you structure the closing ultimately depends upon the terms and conditions set forth in the agreement. Ensure that you read your requirements carefully to execute the deal as anticipated fully.
Here is what generally happens after the signing of a purchase agreement:
- Fund escrow with an escrow company to handle the paperwork if necessary
- Confirm the funding with the company or listing agent for real estate transactions
- Hire third-party experts, such as licensed inspectors, to evaluate the condition of the asset or property before escrow release
- File a report with both the buyer, seller, and other relevant third-parties to confirm the condition of the asset or property
- Sign the escrow, loan, promissory, and deed to close on the asset
- Buyer releases escrow to the seller, which signifies the end of this part of the transaction
It is not uncommon for several US states to allow for a grace period to rescind a loan required for the purchase. This grace period may affect escrow release since the escrow company may wait until it passes. Thereafter, the transaction is completely closed.
What Is The Difference Between A Real Estate Sales Agreement And Purchase Agreement?
While a purchase agreement can be used for any large transaction, a real estate sales agreement is used to sell and transfer residential, commercial, or industrial property.
Different names for a real estate sales agreement may include:
- Purchase agreement for house
- Real estate purchase contract
- For sale by owner purchase agreement
The difference between a real estate sales agreement and a purchase agreement may also consider the role of the person offering it. The seller uses a real estate sales agreement, while the buyer uses a real estate purchase agreement to present an offer.
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Parts Of A Purchase Agreement
While the asset being sold under a purchase agreement may vary from transaction-to-transaction, the sections are generally the same. Essentially, there are specific elements that you must include for it to be lawful and enforceable according to the governing jurisdiction. Ensure that you contain the following features in your purchase agreement at a minimum, although additional terms may be necessary depending on the jurisdiction and the specifics of the agreement.
Article 1: Recitals
You must include the names, business names, and addresses of the parties involved, the date that the agreement goes into effect, and a general acknowledgment and agreement to the terms contained therein. If the agreement is for a real estate transaction, be sure to address tenancy if applicable.
Article 2: Sale Inclusions and Exclusions
List the specific assets that you are transferring and details that describe them as such. If you are buying or selling property, list all sales inclusions and exclusions in the transaction, as well as inspection requirements, appraisals, financing, and titling.
Article 3: Disclosures
The seller must disclose information about the asset or property that could impact the value or sale. Examples of disclosures should include lead hazards, well locations, asbestos hazards, and other pertinent facts.
Article 4: Pricing Terms and Conditions
Next, you will want to address how much the asset or property will cost as well as the terms and conditions surrounding the price. You can also include how the structure of the deal will be made, including cash payments, loan options, closing costs, and more. You should also have the dates of each transaction as well.
Article 5: Possession Terms and Conditions
This section describes how and when the transfer and possession of the asset or property will go. For example, describe when the keys of the property will be delivered for real estate transactions.
Article 6: Default Clause
Buyers and sellers must offer each other the opportunity to cancel the purchase agreement when a provision goes unsatisfied. For example, not paying for the transaction according to the terms could result in the contract entering into default. The default clause should address what steps or actions should be taken if a default occurs.
Article 7: Dated Signatures from All Parties
For a purchase agreement to be valid, it must be executed or signed by all parties. Create a separate date and signature line for each signing individual since it is possible that the signing could occur on different dates.
How To Write A Purchase Agreement
While there are numerous purchase agreements available for reuse online, there are problems with this method. First, they were created for another business or person, and the particulars may not entirely meet your situation’s needs. Start by making a list of the essential parts of the transaction to account for the agreement.
Then you will want to hire property lawyers to draft the first iteration of the purchase agreement. You can then use the document as a jumping-off point when it comes to the negotiation of the transaction’s finalization. As the deal becomes more evident, you can return to your attorney, who can provide legal advice and make modifications to the first draft of the agreement.
Purchase Agreement Templates
Preparing A Purchase Agreement
Since purchase agreements affect your legal rights, you should discuss the drafting and execution of the deal with transactional lawyers licensed to practice in your state. You should also consider working with a legal professional that has experience in the specific area of practice for the type of contract you are drafting. For example, transactions involving real estate should be prepared by real estate lawyers, especially if the transaction is complex.
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Garrett M.
I am a solo practitioner with a practice mostly consisting of serving as counsel to start-ups and small business owners and investors. With a practical business background, I aim to bring practical, business minded solutions to my client's legal problems and pride myself on efficient yet effective work.
"Garrett was extremely professional, attentive, and adhered to the very tight deadlines we had set. I would like to highlight that, in addition to completing the task assigned to him, he took the initiative to research all parties involved in the contract to provide us with the best possible support. We are very satisfied and look forward to working with him again."
Alexander M.
Broad area practice including Business (domestic & international), IP, Employment, Family Law, Administrative, etc. My focus is a direct, no-BS approach with fast turn around times on completed work.
"Alexander delivered fast, thorough, and practical legal guidance. He identified 22 issues with my MSA, provided a clear MSO/PC structure opinion, and mapped out insurance requirements for both entities — all within 24 hours. Highly recommend for any healthcare startup needing Florida specific legal expertise."
Amber M.
Amber Masters has 11 years of experience as a contracts attorney, helping small businesses with an array of agreements, such as purchase agreements, master service agreements, and employment contracts. She has an extensive background assisting health care providers through practice transitions including dentists, doctors, and other health care professionals. She is a highly rated and acclaimed estate planning attorney and personal finance expert, who has been featured on CNBC, NBC, and Yahoo Finance. She successfully launched and sold a fintech startup and can empathize with the issues small and mid-size businesses face. Licensed in Oklahoma and Arizona.
"Amber was great to work with. Clear scope delivery on schedule and budget. Very helpful and efficient. Would highly recommend her."
Adam J.
I'm a California-licensed attorney with 18+ years of experience helping everyone from Fortune 500 companies and venture-backed startups to individuals navigating real-life legal situations. My career started at Fenwick & West, one of Silicon Valley's top law firms, where I worked alongside names like Google, Airbnb, Kleiner Perkins, and Sequoia Capital. From there I moved in - house at companies like Cloudflare, Autodesk, and Enphase - which gave me a practical, business-minded perspective that I bring to every client, no matter the size of the matter. Today I work with businesses and individuals alike. On the business side, that means commercial contracts, leases, startup corporate work, and serving as a fractional general counsel for companies that need a trusted legal partner without the overhead. On the personal side, I help individuals with employment matters, disputes, demand letters, contract review, and the kind of everyday legal situations where you just need someone knowledgeable in your corner. I'm direct, responsive, and I speak plain English — not legalese. Whether you're a founder closing your first deal or an individual facing a situation you've never navigated before, I'll give you the same level of attention and care.
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Darshun K.
Darshun K.
I am a triple-threat legal and financial strategist with 15+ years of experience navigating complex capital raises, M&A transactions, and regulatory compliance. As the Founder of Kairos Capital Legal Advisors and a Series 65 licensed Investment Adviser Representative, I bridge the gap between sophisticated legal drafting and actionable business guidance. My practice focuses on: - Capital Markets: Drafting and filing complex legal/financial documents for multimillion-dollar capital raises. - M&A Advisory: Guiding mid-market companies through all phases of sell-side mergers and acquisitions. - Strategic Counsel: Providing due diligence and deal structure analysis for private equity and venture capital clients. - Dispute Resolution: Serving as a non-public FINRA arbitrator to resolve high-stakes issuing and investor disputes. Beyond the firm, I serve as a Member of the Georgia House of Representatives (2011–present) and am a published author on private markets. I specialize in translating intricate legal hurdles into high-impact business outcomes.
April 19, 2026
Carver F.
I'm the principal attorney at FarrowLaw PC, a California business and commercial law firm based in Long Beach. My practice covers transactional work, employment law, litigation, and day-to-day advisory matters for business clients — essentially, I help companies make clear-eyed decisions about risk, contracts, and strategy without the usual legal hedging. Before law, I trained in computer science and worked in-house at technology companies, which gives me a working fluency in how tech businesses actually operate. A significant portion of my practice involves representing tech and startup clients, where that background lets me engage with technical realities rather than abstract them away. If you're working with a client who needs a practical California business lawyer — particularly one who speaks the language of tech — I'd welcome the introduction.
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Ricardo J.
Ricardo Jerome is a Florida-based attorney and founder of The Jerome Law Firm, PLLC, serving clients throughout Miami-Dade and Broward County. His practice focuses on probate and estate administration, estate planning, real estate, business law, immigration, civil litigation, and contract disputes. He is known for providing practical, client-focused solutions and guiding individuals, families, and business owners through complex legal processes with clarity and efficiency. Bilingual in English and Spanish, Mr. Jerome is committed to making legal services accessible to a diverse community while building long-term relationships grounded in trust and results.
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Legal Review of 13-Page Short Sale Contract in Florida
"I’m incredibly grateful for the guidance I received from Gill!I was considering purchasing a short sale property, and thanks to his careful review of the contract, he identified several concerning terms that I had completely overlooked. He took the time to explain the risks clearly and helped me make the difficult but smart decision not to move forward. His honesty, attention to detail, and commitment to protecting my best interests truly stood out. I highly recommend him to anyone needing a trustworthy and knowledgeable real estate lawyer."
ContractsCounsel User
Residential Purchase Agreement
"Easy to work with and offered guidance as requested!"
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PSA
"She was amazing and really quick :) Will use again in the future! Thank you"
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Limited-Scope Review of Temporary Refinance and Property Sale Agreement (Indiana)
"Very receptive and kind. Made sure to think of every possible loop and made me aware of what my outcomes could be."
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Real Estate
Purchase Agreement
New York
Are there cancellation fees in purchase agreements?
I am currently in the process of purchasing a home and I have been presented with a purchase agreement. I was wondering if there are any cancellation fees included in the agreement, as I would like to make sure that I am aware of all the terms and potential costs associated with this purchase. I want to make sure that I am fully informed before I make a final decision.
Damien B.
Hello! I understand you are entering into a Purchase Agreement and want to know whether there are any cancellation fees. First, you would read the agreement to see if there is any mention of termination/cancellation fees such as the loss of the down payment if the buyer attempt to terminate the contract. But, generally, the agreement is binding contract. So, if a buyer attempts to cancel the contract, it could be considered a breach of contract. In that situation, the seller can claim damages, which usually results in a loss of the down payment but also could lead to other monetary claims or a claim to attempt to force the buyer to fulfill the purchase (general called a specific performance claim). Separately, in most cases, if the buyer's ability to purchase the property is dependent on getting a secured loan, usually there would be no cancellation or damage claim and the buyer would have the right to the return of the downpayment (this should be outlined in the contract and is usually referred to as a contingency clause). I hope that helps.
Real Estate
Purchase Agreement
California
Can a seller back out of a purchase agreement after accepting an offer?
I recently entered into a purchase agreement to buy a house, and the seller accepted my offer. However, just a few days later, the seller informed me that they have changed their mind and no longer want to sell the property. I have already made arrangements for financing and I am concerned about my rights as a buyer. Can the seller legally back out of the purchase agreement after accepting my offer?
Dolan W.
I'm so sorry about this situation! So legally speaking, the answer is no. Under California law, a breach of contract occurs when one party fails to fulfill a legal duty the contract created and causes damages for the plaintiff. (California Civil Jury Instructions Number 303.) The measure of damages is the amount that will compensate the aggrieved party for all the detriment caused thereby or likely to result therefrom. (Cal. Civ. Code § 3300.) You may also seek specific performance of the agreement, too. You have some options you can explore: You can send them a demand for performance or some financial compensation. I have a template letter you can use here - https://www.contractscounsel.com/t/document-form-checkout/119 Otherwise, you can file a lawsuit in your local court. If you’ve already sent a bunch of letters, then the truth is this is the only way to compel them to do anything. Best of luck!
Business Contracts
Purchase Agreement
Washington
Are purchase agreement renewals common?
I am in the process of purchasing a business and have been presented with a purchase agreement by the seller. The agreement includes a clause that seems to imply that the agreement can be renewed. I am curious to know if this is a common practice, and if so, what are the implications for me as the buyer?
Merry K.
I'm not 100% sure what you are asking, but in negotiatons of purchases of businesses, business real estate, and personal real estate, it's not unusual to sign amendments extending the date by which an agreement must be made, or by which closing will occur. There can be many, many reasons for this, but generally, at least in my experience, both parties must agree in writing to any extensions of any sort of dates or deadlines. Here are two very common reasons a purchase and sale agreement may need to be extended: (1) Obtaining financing or (2) Obtaining an inspection I hope that helps! Best wishes, Merry
Business Contracts
Purchase Agreement
Washington
What are risks without a purchase agreement?
I am considering purchasing a business and have been asked to sign a purchase agreement. However, I am unsure if this is necessary and would like to understand the potential risks of not having a purchase agreement in place. I want to ensure that I am making a well-informed decision and have the necessary protections in place.
Merry K.
Purchasing a business without a binding agreement would be extremely risky (and, I'm sorry to be blunt, but extremely foolish). For example, without an agreement in which the seller is responsible for debts incurred prior to the sale, creditors could come after you.
Real Estate
Purchase Agreement
New York
Who has the lawyer draft the purchase agreement for a for sale by owner?
I am selling my home and am being asked to provide an agreement.
Jane C.
Typically, the seller has a lawyer draft the purchase agreement. Disclaimer - This information is provided for general informational purposes only. No information contained in this post should be construed as legal advice and does not establish an attorney-client relationship.
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1. Draft a Purchase Agreement, 2. Assist with SBA Loan documentation, 3. Draft a Promissory Note, 4. Draft a Non-Compete Agreement, 5. Draft a Transition Services/Employment Agreement for the 6-month
Location: New York
Turnaround: Over a week
Service: Drafting
Doc Type: Purchase Agreement
Number of Bids: 10
Bid Range: $700 - $5,900
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