Critical Terms to Include in Property Purchase Agreements

A property purchase agreement is one of the most important legal documents in a real estate transaction. It defines the rights, responsibilities, and obligations of both the buyer and the seller and provides a roadmap for completing the sale. In New York, purchase agreements are governed by specific laws and practices that require careful attention to detail.

At the Law Office of Corey J. Rossi, PLLC in Tonawanda, New York, we understand the importance of drafting comprehensive and legally sound purchase agreements.

Whether you're buying your first home, investing in commercial real estate, or selling property, the agreement must include critical terms to protect your interests. A real estate lawyer can help.

Purchase Price and Payment Terms

The purchase price is the cornerstone of any property transaction, and its inclusion in the agreement is mandatory. This section should clearly state the total price the buyer agrees to pay and the payment method.

Common payment structures include:

• Cash payments.

• Financing through a mortgage.

• Seller financing, if applicable.

Additionally, payment terms such as the deposit amount, deadlines for installments, and the final payment due date must be specified. If financing is involved, the agreement should include contingencies related to loan approval to safeguard the buyer if funding falls through. A real estate lawyer can oversee this process.

Property Description

A clear and accurate description of the property being sold is vital to prevent disputes. This section typically includes:

• The property's physical address.

• Legal description (as provided in public records).

• Parcel number.

If the property includes additional features, such as outbuildings, easements, or rights of way, these should also be detailed. The agreement should confirm both parties have a shared understanding of what is included in the sale.

Closing Date and Possession

The agreement must establish the closing date, the day the transaction is finalized, and ownership is transferred. This date is often tied to specific contingencies, such as securing financing or completing inspections.

Additionally, the agreement should clarify when the buyer will take possession of the property. While possession typically occurs at closing, there may be exceptions, such as lease-back arrangements where the seller stays on the property for a short time. Ask a real estate lawyer for more information.

Contingencies

Contingencies are conditions that must be met before the agreement becomes binding. Common contingencies in New York property purchase agreements include:

• Inspection contingency: Allows the buyer to conduct a property inspection and request repairs or renegotiate based on findings.

• Financing contingency: Protects the buyer if they can’t secure a mortgage.

• Appraisal contingency: confirms the property’s appraised value meets or exceeds the agreed-upon price.

These contingencies protect both parties and provide a guideline for addressing unforeseen issues without voiding the agreement.

Disclosures

New York law requires sellers to provide certain disclosures about the property's condition, as outlined in the Property Condition Disclosure Act (PCDA). This includes information about structural integrity, environmental hazards, and other material facts that may affect the property's value.

Buyers should carefully review these disclosures to identify potential concerns with the help of a real estate lawyer. If a seller fails to provide the required disclosures, they may face penalties, including monetary damages.

Title and Ownership

The agreement must address the transfer of clear and marketable title to the buyer. It should require the seller to resolve any title issues, such as liens, easements, or boundary disputes, before closing.

This section may also specify the type of deed the seller will deliver, such as a warranty deed or quitclaim deed. A warranty deed offers the highest level of protection to the buyer, guaranteeing that the seller has the legal right to sell the property and that the title is free from defects.

Prorations and Adjustments

Prorations confirm that recurring costs associated with the property, such as property taxes, homeowner association fees, and utilities, are fairly divided between the buyer and seller. The agreement should specify how these costs will be prorated based on the closing date.

For example, if the closing occurs halfway through the tax year, the seller may be responsible for taxes accrued up to the closing date while the buyer covers the remaining portion.  

Default and Remedies

This section outlines the consequences if either party fails to fulfill their obligations under the agreement. For example:

• If the buyer defaults, the seller may retain the deposit as liquidated damages or pursue other remedies.

• If the seller defaults, the buyer may seek specific performance (forcing the sale) or monetary damages.

Clearly defining default terms and remedies helps both parties understand their rights and provides a mechanism for resolving disputes. A real estate lawyer can help.

Representations and Warranties

Representations and warranties are statements made by the buyer and seller to affirm certain facts about the transaction. For instance, the seller may represent that they have clear ownership of the property, while the buyer may affirm their intent to purchase the property for a specific use.

These statements provide additional assurances and reduce the risk of misunderstandings.

Escrow Arrangements

An escrow arrangement involves a neutral third party holding funds or documents until all terms of the agreement are met. This arrangement protects both parties during the transaction.

The agreement should specify:

• The escrow agent or company handling the transaction.

• Conditions for releasing funds or documents.

• Responsibilities of the escrow agent.

Escrow arrangements are particularly important when dealing with large transactions or significant contingencies.

Risk of Loss

The risk of loss provision addresses what happens if the property is damaged or destroyed before the closing date. In New York, the Uniform Vendor and Purchaser Risk Act often apply, which states that the seller bears the risk of loss until the title or possession is transferred.

Including this provision in the agreement clarifies the parties’ obligations and prevents disputes in the event of unexpected damage with the help of a real estate lawyer.

Legal Compliance

The agreement must comply with all applicable New York laws and regulations. This includes adherence to fair housing laws, zoning ordinances, and environmental regulations. Additionally, the agreement should specify which jurisdiction's laws govern the transaction, particularly if one party resides outside New York.

Attorney Review Clause

In New York, it’s common to include an attorney review clause allowing each party’s lawyer to review and propose modifications to the agreement within a specified period after signing. A real estate lawyer can include this clause to help address any legal concerns and confirm that the agreement aligns with the parties’ intentions.

Inspection Rights and Responsibilities

Inspection rights are a crucial element of any property purchase agreement, as they allow the buyer to thoroughly assess the property before completing the transaction. This section should specify the timeline for inspections, the types of inspections allowed, and how inspection-related issues will be addressed.

Common types of inspections include:

• Structural integrity evaluations.

• Pest inspections.

• Environmental hazard assessments, such as testing for asbestos or lead.

The agreement should also address the buyer’s options if inspections uncover significant issues, such as the ability to request repairs, renegotiate the price, or withdraw from the agreement altogether. Setting clear expectations for inspections helps avoid disputes and confirms transparency between the buyer and seller.

Closing Costs and Fees

Real estate transactions often involve various closing costs and fees that need to be clearly outlined in the purchase agreement. These may include:

• Title insurance premiums.

• Escrow fees.

• Attorney fees.

• Transfer taxes.

The agreement should specify which party is responsible for each cost. While it’s common for the buyer to cover the bulk of these expenses, certain fees, such as transfer taxes, may be negotiated.

By addressing closing costs in detail, both parties can avoid surprises during the final stages of the transaction. A clear allocation of responsibilities contributes to a smoother closing process and helps confirm all financial obligations are met.

The First Steps

Reach out to the experienced real estate lawyers at the Law Office of Corey J. Rossi, PLLC today. We’re happy to assist the people of Tonawanda, New York, and the surrounding areas of Amherst, Wheatfield, and throughout Erie County and Niagara County. Contact us today!