Learning Legal Contracts
Residential Purchase Contract — Key Provisions and Resources
Based on American Bar Association (ABA) guidance
Important Note
The American Bar Association (ABA) provides a detailed framework for what a residential purchase contract should include, but it does not offer a single fill-in-the-blank template that works for all states. Real estate contracts are highly state-specific, so a contract valid in one state may be legally insufficient in another.
Key Provisions of a Residential Purchase Contract
According to the ABA, a purchase contract is typically a standard form with riders attached. It should include the following essential elements:
| Provision | Description |
|---|---|
| Date and Parties | The date of the contract and names of the buyer and seller. |
| Purchase Price and Deposit | The purchase price of the home, the amount of the down payment, and the amount of earnest money deposit. |
| Included/Excluded Items | All items to be included in the sale (e.g., appliances, lighting fixtures) and any items to be excluded (e.g., a specific heirloom). |
| Closing Date | The date when the deed will be transferred. |
| Mortgage Contingency | States the buyer’s intention to obtain a loan at a specified amount/rate within a set timeframe. If financing fails, the buyer may be released from the contract. |
| Inspection Rider | Allows the buyer to have the home inspected within a specific period. If unsatisfactory, the buyer may be released, or the seller may agree to repairs or a price reduction. |
| Title and Deed | A provision that the seller will provide good, marketable title. This is often fulfilled via a title insurance policy or abstract of title. It should also specify the type of deed to be conveyed. |
| Prorations | Provision for paying utility bills, property taxes, and similar expenses through the closing date. |
| Possession | A firm date for transferring possession. It should also specify a daily rent amount if the seller does not vacate by the agreed date. |
| Walk-Through Inspection | Allows the buyer to inspect the property within a specified period before closing to ensure it is in the agreed-upon condition. |
| Risk of Loss | Specifies who is responsible for maintaining insurance and bearing the risk of loss if the property is damaged before closing. |
| Signatures | Signatures of all parties involved. |
The ABA also recommends considering several other important questions, such as: who pays for title examination and survey costs, which inspections are required, what disclosures the seller must provide, and what the remedies are if either party defaults.
How to Find Official Contracts and Resources
Since there is no universal ABA contract, you should look to your state’s real estate commission or a local bar association for the official forms used in your jurisdiction.
American Bar Association (ABA) Resources
The ABA provides excellent consumer guides and checklists to help you understand the process, which are invaluable for reviewing any contract you are asked to sign.
- The Purchase Contract: An overview of key provisions.
- Buying or Selling a Home: Another detailed guide on contract provisions.
- Home Buying Resources: A hub for various resources.
State-Specific Contracts
Many states mandate the use of specific forms. Some examples include:
- Texas: The Texas Real Estate Commission (TREC) adopts standard contract forms, such as the One to Four Family Residential Contract (Resale), which are mandatory for licensees.
- Louisiana: The Louisiana Real Estate Commission prescribes the Residential Agreement to Buy or Sell that licensees must use.
- California: The California Association of REALTORS® (C.A.R.) provides the standard Residential Purchase Agreement (RPA-CA), which is widely used in the state.
- Utah: The Utah Division of Real Estate provides the official Real Estate Purchase Contract (REPC) as a free public PDF.
Critical Considerations
- State Law Governs: Real estate transactions are primarily governed by state law, and requirements can vary significantly.
- Attorney Review: The ABA strongly advises involving a lawyer before signing any contract, especially for a major purchase like a home. An attorney can review the contract, explain the terms, and ensure your interests are protected.
- Deed Types: The contract should specify what type of deed you will receive. A General Warranty Deed offers the most protection, while a Quitclaim Deed offers none and is typically not used in residential purchases.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Real estate laws vary by state and jurisdiction. Consult a licensed attorney or real estate professional before entering into any purchase agreement.
