A purchase agreement is a contract specifying the terms of a sale of goods between a buyer and seller. This is how you can start drafting yours.
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A purchase agreement, also known as a Sales and Purchase Agreement or SPA, is one of the most common forms of legally binding contract people will encounter in their day-to-day lives. If you’ve ever participated in a real estate transaction, for example, then you’ve almost certainly encountered and read a purchase agreement at some point. They’re also used for a huge variety of other business transactions between a buyer and seller.
Drafting a purchase agreement is a relatively straightforward process, but including all the appropriate details of the specific transaction you’re setting up can mean tracking down a lot of different information. In complex transactions, the resulting purchase agreement can span hundreds of pages with dozens of supporting details and documentation.
In this guide, we will cover some of the basics for drafting a real estate purchase agreement yourself, whether it’s a simple one-pager or a much longer document. These tips will help you navigate the drafting process, but they are not intended to be legal advice.
This blog post is offered for general information purposes only. It does not constitute, and is not a substitute for, legal advice.
A purchase agreement is a contract generally used in transactions where the buyer is purchasing goods instead of services. This type of contract is most common in more complex and expensive transactions, such as purchasing real estate or large, specialized equipment.
A purchase agreement is also usually the key document used in the purchase and sale of real estate. Unlike business transactions for specialized equipment, however, real estate purchase agreements can evolve as terms and conditions are negotiated.
A purchase order can be initiated by a buyer before any terms have been discussed. A purchase agreement for specialized equipment or other large orders, on the other hand, can only be drafted once the buyer and seller have agreed on all terms and conditions of the purchase. The purchase agreement becomes the contract that codifies those agreed-upon terms and conditions and makes them legally binding.
Put simply, a purchase agreement is a contract. This means that once it is signed, the language is fixed and is legally binding for the buyer and seller. At its most basic, a purchase agreement should include the following:
When drafting a purchase agreement, simply lumping all the contingencies and disclosures together in a document won’t cut it. To make sure you have your bases covered, consider these contract drafting best practices:
The disclosure portion of a purchase agreement helps the buyer trust that they know exactly what they are buying and that there will be no catastrophic surprises after they move in. Common disclosures included in purchase agreements include:
Other disclosures might include that there has been a death on the premises, known repairs that are needed, and whether the home is in a regulated historic district. Requirements for what needs to be disclosed in a purchase agreement in the US can vary by state. Make sure you consult local disclosure requirements as you write the agreement.
Contingencies are the “conditions” part of “terms and conditions.” While the contingencies remain unresolved, the seller can continue to market their house to other potential buyers. If another interested buyer makes a better offer or an offer without contingencies, the seller can go back to the original buyer to see if they will remove their contingencies or counter the new offer. The seller is also allowed to simply accept the new offer without obligation to the original buyer.
Most contingencies are simple conditions like:
Digital templates can add a lot of value to your drafting process. Whether it’s using the template as a starting point or checking your completed purchase agreement against a third-party document, a template can save significant time and effort.
A DocuSign template makes it easy to send your purchase agreement for eSignature, automates the process of distributing final copies of the document to buyer and seller, and can store the document digitally with DocuSign’s full suite of digital and physical security.
