The Importance of a Real Estate Purchase Agreement
In its most basic form, a Real Estate Purchase Agreement (or “REPA” for short) is a contract between the buyer and the seller in which the parties’ rights, terms, and responsibilities are listed with regards to the purchase of real property. These contracts are often overlooked or inadequately drafted as the parties expect every aspect of the transaction will go smoothly. When any issues arise regarding the purchase of the property, the first step is to look at the REPA for guidance. If the REPA does not adequately reflect the agreement of the parties, it often ends up in a lawsuit. To help avoid these issues, some basic aspects of a REPA are outlined below.
Fundamental Terms:
Most people recognize that a REPA should include the fundamental terms of the agreement such as the names of the parties, description of the real property, and price for the purchase. Often overlooked, however, is how important it is that as much detail be added as possible. For instance, instead of just listing the parties’ names, a drafter should list their marital status and current address at which they can be contacted. Further, instead of merely listing the address of the real property being sold, the drafter should list the exact legal description of the property. Finally, the parties should describe in detail how the money is to be paid to the Seller. Is there a down payment or earnest money? Is it to be paid by money wire, cash, or certified check? By clarifying the fundamental terms of the REPA, the parties have a clearer picture of what is expected in the purchase.
Unique Terms:
While a REPA with only fundamental terms is often enforceable, it is much better to explore contingencies by including unique terms. There are a wide variety of unique terms which can be included in a REPA. Two terms which are of utmost importance include terms providing how title is to be conveyed and terms regarding the closing. Terms which speak to how title is conveyed are important as they describe whether a title examination is to be conducted and what type of deed is to be provided. These terms can help identify if there are any liens, mortgages, or issues with the title to the property as well as what rights are transferred from the Seller to the Buyer. Further, a term which speaks to the closing date is important as it puts a deadline as to when each party must fulfill their responsibilities listed within the REPA. Due to the nature of a REPA, numerous other unique terms could be required. These terms make REPAs highly flexible and thus each one should be altered for every separate purchase.
Legal Requirements:
Finally, in Oklahoma, there are multiple legal requirements in order for a REPA to be considered enforceable. One of the most important is the requirement that a REPA must be written to be legally valid. In many instances a verbal agreement may be considered a valid contract. This is not the case when it comes to REPAs. Oklahoma law requires that, in order for a REPA to be legally binding, it must be a written agreement. Thus, a verbal agreement to buy or sell land is unlikely to be upheld if taken to court.
We understand that it can be difficult to draft the right Real Estate Purchase Agreement for your situation. With our over 100 years of combined experience, Stuart & Clover would be happy to assist you with drafting your next Real Estate Purchase Agreement.
