One of the most stable and profitable assets to invest in is real estate. Accumulate several properties under your name and gain freedom of abode in various states, if you will. More importantly, the housing market can only get more lucrative as there are always people who want to own a house or are in it to ride the wave of market speculation in hopes of raking in profits.

Understanding the Legal Aspects

Ownership of properties is hugely a legal process, and it involves a level of understanding of these proceedings. Whether you’re selling or buying, there has to be a contract explaining your responsibilities to the opposite party and vice versa. If you rely on a verbal agreement instead, you should know that you cannot claim compensation for unmet terms previously agreed on.

Sadly, although a contract legally binds some deals, many do not bother checking every detail to ensure the terms are fair. Do not make the same mistake, seek guidance from a reputable real estate lawyer, and do not hesitate to ask them about details you don’t fully understand. Make them represent you in discussions about the contract and negotiate on terms with the other party.

Also, it is imperative to have basic knowledge of any contract regarding a property. Its absence automatically merits you to delay the closing until the contract is corrected or terminate the deal overall.

Inspection Clause

Under a home inspection contingency in the contract, a potential buyer must be allowed to inspect the house before the official sale. If major flaws in the house’s interior and structure are detected with the help of a licensed inspector, it should form a legal ground to terminate the transaction.

Depending on which state the house is located in, provisions for a home inspection may vary. Also, if the buyer specifically considers purchasing a house that he intends to demolish and replace with a new home, the inspection clause could be omitted from the purchase agreement.

Inclusion of Fixtures

If, before the purchase, both parties agreed on including certain fixtures and appliances in the sale, this should be legally put into writing. These objects must be itemized in detail in the contract with their respective appraised values. The absence of such a clause only runs the buyer the risk of paying a premium for the vacated storage of the appliance, in other words, being conned.


This section of the contract specifies what medium of financing the buyer will use to pay for the purchase. If not cash, a buyer typically is relieved of the financial burden with the help of a loan or mortgage. In some cases, the property is being sold by its current owner without completing their mortgage obligation so that they can pass this on to the prospective buyer.

property purchase agreement concept

Appraisal Contingency

An appraisal contingency seals the agreed-upon price to be paid when the property was appraised. There are several other contingencies like the above-mentioned inspection clause, but this is perhaps the most crucial among all. Missing crucial details like how the property’s valuation is worded is a common pitfall among those who use a standard contract template.

For instance, suppose the agreement specifies that the house should be appraised for “no less than x dollars.” This is contrary to the verbally agreed amount that is way lower than “x dollars.” This arrangement can cause the buyer to succumb to losses because they legally consented to the deal.

Earnest Deposit

Earnest money is the amount a buyer pays the seller to signify seriousness about buying the property. If the buyer becomes incapable of sticking to the terms for some circumstance, including the payment of monthly dues to the seller, the seller gets to keep the earnest deposit. Then, the agreement is dissolved.

Closing Cost Coverage

A buyer has the option to request the seller to shoulder part of the deal’s closing costs which involves fees for title search, escrow, and transfer. If the seller agrees, this usually incentivizes the buyer to pay more for the house later on. Eventually, the seller benefits from covering some closing costs.

Those new to the game have the impression that investing in and selling real estate is a piece of cake. However, this is not the case. Many individuals get too caught up with earning margins or are too naive that, in the end, they are at the losing end of the deal. Therefore, learning the basics of a purchase agreement or a real estate contract is the fool-proof route for any investor.