Purchase Agreement Template

A purchase agreement template is a document that records the details of the transaction between two parties. It can be created for the sale or purchase of various goods — real property, vehicles, business assets, personal property such as jewelry, artwork, etc. In comparison to a receipt or a bill of sale, a purchase agreement is a more comprehensive document that, along with basic terms of sale (description of the real or personal property, purchase price), also includes rights and obligations of both parties.

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What Is a Sales and Purchase Agreement and When to Use It?

A sales and purchase agreement can be used to record any purchase or sale of any item, commonly of high value when the price is more than $500. One party in the agreement is a buyer — an individual or entity that purchases a good, and another party is a seller — a person or organization that sells an item.

The most common situations when parties use a purchase and sales agreement are:

  • when selling or purchasing goods (any physical items in possession of the seller)
  • when selling goods and providing services (for instance, when selling a personal computer and providing the service of software installation)

It is critical to include a description of the item and service if both are provided in the document.

Purchase Agreement vs. Bill of Sale

One might ask, “Why wouldn’t I use a bill of sale template instead of a purchase agreement?” The answer is that the purposes of these agreements are similar, but they should be used in different situations. A purchase and sales agreement should be used when parties need an agreement that will include details on payment and warranties on the purchased goods. A bill of sale is more the record of the purchase and transfer of the ownership while a purchase and sales agreement lets the parties arrange the terms of the agreement before goods are sold and bought. A bill of sale might become a part of a purchase and sales agreement when parties want to highlight the change of ownership in it.

What Types of Purchase Agreements Exist?

As we have mentioned, a purchase agreement might include the terms of purchase of various goods. Based on the type of real or personal property concerned in the agreement, there are several types of purchase agreements.

Real estate purchase agreement

A real estate purchase agreement is a binding agreement between seller and buyer that discusses the details of the change of the ownership of real property. In such an agreement, the parties include the provisions about the purchase price, terms of closing, amount of the money deposit, etc. The parties might also include various contingencies pertaining to the closing of the deal such as obtaining financing from a local financial institution by the buyer.

Stock purchase agreement

The agreement is meant to finalize the terms and conditions of the purchase and sale of stocks of a certain company. Stock purchase agreement usually includes basic terms such as transaction details, number of shares, information about the stock issuer, cost per share, etc.

Business purchase agreement

The contract is used to transfer the ownership of the business from one party to another. A business purchase agreement is used to sell retail stores, restaurants, etc. As a rule, it covers the purchase price, what is included in it, warranties for both sides, and other terms.

Vehicle purchase agreement

A vehicle purchase agreement is designed to outline the most important details of the transaction involving a vehicle. Commonly, the contract includes provisions about buyer and seller and description of the vehicle (make, the model, model year, the VIN, the mileage). It also specifies when the title will be conveyed to a buyer.

Land purchase agreement

A contract that outlines the terms of sale and purchase of land is called a land purchase and sales agreement. One of the basic terms included in the agreement is the purchase price, earnest deposit, and closing date. A land purchase agreement should explicitly state that if the buyer does not acquire the land by the closing date, the deposit might be kept by the seller.

Asset purchase agreement

An asset sales contract sets out the terms and conditions pertaining to the sale and purchase of assets in a company. The agreement differs from a stock purchase agreement. In the first, the company itself is the seller of the assets, while in the latter, individual shareholders act as sellers. One of the distinctive features of an asset purchase agreement is a provision about employees — it states how employee benefits and any accrued bonuses should be handled after closing the deal.

Mobile home purchase agreement

In an agreement related to the purchase of such personal property as a mobile home, the details of the sale are outlined. A mobile home purchase agreement typically covers the purchase price, when the closure of escrow should occur, description of the mobile home, finance terms, and some other important details.

How to Amend a Purchase Agreement

To bring any amendments to a purchase and sales agreement, the parties should first negotiate the necessity of such changes and agree to what new terms they want to bring. Let’s say for example that certain language needs to be deleted from the document, or some new terms need to be added.

Then, they should create a new document called the Amendment to Purchase Agreement. The document should start with specifying information about the parties and making a reference to the original document and also stating its date. The parties should also outline in the body of the document what sort of amendment they want to bring. For example, they might write that a certain section should be amended to read in a new language.

After that, a signature line should be created for all parties involved. The document should be signed by the seller and buyer and acknowledged in front of a notary. Finally, the original agreement should be attached to the amended document.

To properly amend a purchase agreement, first make sure to consult a law firm. Legal advice they will provide you with will help you properly amend the existing document,

What Are the Main Elements of a Purchase Agreement?

Every purchase and sales agreement regardless of what it concerns will include some basic elements.

Information about the parties and item to be sold

One of the most important elements in a sales contract is the information about the parties. The agreement should set out the names of the individuals or entities involved in the deal.

In the case of real property purchases, there might be several buyers at a time. Then, the agreement should explicitly state that the new owners will own the property jointly (when the parties own the entire property and do not have a particular share in it) or in common (when each of the owners has a definite share in the property).

Description of the item

When it comes to the sale of property, legal description along with address should be included in the contract. It is necessary for the document to be valid and recorded properly. If the agreement concerns the sale of stock, the type and number of shares should be included.

Price

Any purchase agreement should have a section where the price for real or personal property that is being sold will be included. The agreement might also indicate where the financing will come from and in what way the sum will be paid. The parties might agree to the payment being made in cash, installments, etc.

In the same section, the parties might agree about an earnest money deposit. It is typical to set it at the level of 0.5%-1% of the purchase price. It is also a common practice to specify what happens to the money deposit if the buyer does not take the expected actions.

Closing dates and contingencies

It is often that the purchase of a new real or personal property is contingent upon some other factors, for instance getting financing from a third party (usually, a financial institution). Another contingency might be conducting a property inspection (or due diligence in case of a business or stock purchase). Including such contingencies means that if they are not met, the sale cannot be completed and the contract cannot become legally binding.

The closing date should also be set out in a purchase agreement. In the case of a residential property purchase, the closing date often coincides with the date of selling the old property. Or, it can just be a certain date when the seller expects the agreed sum of the item to be paid in full.

Tax information and additional provisions

The more details your purchase agreement will cover, the better protection both sides will get. A section about taxes is one of the most important elements in the agreement. It is common for sellers to take on the burden of paying taxes pertaining to the purchase of the item, but the parties might agree to another option as well.

Additional provisions will heavily depend on the type of real or personal property to be sold. For example, if the agreement concerns the purchase of real property, among the additional information, might be property condition assessments, fixtures, and appliances, window treatments, etc.

It is always better to consult a law firm before using a purchase agreement. They will provide legal advice on how to make an individual contract that will discuss all of the terms you would want and need to include in your specific situation. You might also want to talk to a tax lawyer to learn how the sale of the property might affect your tax return when you will be reporting your income to the Internal Revenue Service (IRS).

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Filling Out the Purchase Agreement Template

As we have said, the structure of the agreement will depend on the type of item that is to be sold. This is why we will consider the most generic form of a purchase agreement. Please mind that to make sure the agreement is comprehensive enough, it is always better to first turn to a law firm that will provide legal advice on the matter.

Step 1 — Seller, buyer, and concerned item

First of all, the sales agreement should tell the date of the document, the names of the parties, and their mailing addresses. Then, it should state that they agree to buy and sell a concerned item (personal property, real estate, assets, business, land, mobile home, etc.)

If the document concerns land or real estate, it should outline the legal details of the property such as tax parcel information, address, total gross area or square feet, etc.

Step 2 — Purchase price

The document should state at what price the item should be sold. The parties might add that the price includes any applicable sales taxes.

This section should also indicate whether or not any kind of loan or financing is needed to purchase real or personal property. If yes, the document should explicitly say under what conditions the buyer expects to obtain financing. The due when the seller should get the letter from the buyer verifying the ability to obtain financing date should be included as well.

Step 3 — Payment

This section of the agreement should indicate in what way the buyer will make the payment. Typically, they can choose from making payment in cash, through personal check, money order, credit or debit card, etc.

In the same section, the parties have to specify any down payment or installments they agree to. If parties agree to pay with an earnest money deposit, it should be indicated in the document by using a specific language. It should state what amount of deposit the seller agrees to and by what date it should be made. The sale agreement might also state whether or not the deposit should be placed in a separate escrow account.

Step 4 — Closing date and costs

The parties should agree on who will be responsible for covering the expenses associated with the agreement (such as taxes). The parties might split the expenses, or they might fall on one of the parties.

The date when the closing of the deal should occur should be indicated further in the sale agreement.

Step 5 — Delivery

Another provision the document should cover is the delivery of the item (unless the document concerns the purchase of real property). It should state when the buyer will be entitled to take possession of the property.

Step 6 — Representations and warranties

In the Representations section, parties usually state the facts pertaining to the sale. It is common for a seller to mention in the document that they have full authority to sell the property and the property is free of any liens, indebtedness, or liabilities. They might also add that the real or personal property is being sold in “as-is” condition. Another common language in the document is that the seller expressly disclaims any warranties regarding the sold item.

Step 7 — Additional facts affecting the closing

The parties might agree that the closing of the deal might be affected by some other conditions.

For instance, in case of selling real estate or land, they might include the provision about the Buyer being given the right to obtain a Property Survey before the closing date and the number of days they will have to inform the seller if there are any survey problems that should be remedied. There might also be a provision about the property or land appraisal. It might state that the property sale either depends upon the results of a formal appraisal or not.

Step 8 — Governing law

The parties should agree on what law they will consider governing. For agreements involving residential properties, the laws of the state where the property is located are usually considered governing.

Step 9 — Disputes

To make sure both sides are aware of the ways to resolve the possible disputes, the agreement should specify how they expect to solve any arguments arising from the agreement.

Step 10 — Signatures

The entire agreement should be revised before the parties put their signatures. The dates and printed names of each of the parties should be included as well.

If you need a good template of a purchase agreement, use the one provided on our website. But make sure to use the services of a law firm that will provide legal advice on the type of agreement you need. This way, you will grant the highest level of protection for both parties.

Published: Mar 23, 2021