A purchase agreement is a legally binding contract between a buyer and seller. These agreements usually relate to the buying and selling of goods instead of services, and they can cover transactions for just about any type of product. In real estate, a purchase agreement outlines the purchase price and other conditions under a title transfer.

Usually, purchase agreements are used when the purchase price is more than $500, but they may also be used for smaller transactions. They're common in real estate and home sales. They're widely used in the telecommunications industry. For instance, a customer may buy different communications packages, so that agreement is a “volume purchase agreement.” Purchase agreements protect buyers and sellers from the risk of a breach of contract.

Consider this example: John and Anna want to buy a home. They fall in love with one, so they start negotiating with a realtor. Everything looks good, and they sign a purchase agreement. The agreement details the following:
1 The couple's move-in date
2 How John and Anna will pay for the home
3 A contingency clause that explains the couple must first sell its old home and move funds into an escrow account
4 In the purchase agreement, the seller must declare that the home has no lead paint. Once John and Anna's old house sells, the escrow account confirms this, and the sale is complete.


What to Include
A well-written purchase agreement should include all of a transaction's relevant information. It needs to be clear and specific so that no misunderstandings arise regarding the various terms.

A basic agreement should include the following information:
1 Buyer and seller information, such as names, addresses, and phone numbers
2 The type of product or goods involved
3 The type of sale br 4 Contact information for witnesses or cosigners
5 Sale price
6 Quantities
7 Agreement date
8 Terms related to duration
9 Delivery and shipping terms, when applicable
10 Dates relating to fulfillment of various requirements
11 Whether amendments or revisions to the agreement are allowed
12 Options in the event of any legal disputes

Purchase agreements are usually much more complicated than simple purchase receipts or invoices. These agreements often detail the different conditions that each party must meet in order to complete the sale. Purchase contracts may describe the following: Terms of financing, since most people who buy homes can't afford to pay cash for the entire purchase price Who's responsible for closing costs Home inspection requirements Closing date Your jurisdiction will determine exactly what's included in the contract. The contract may have a contingency that a buyer needs to sell his current home before having the necessary funds to complete the transaction. You'll find a possession date in a real estate purchase agreement, which specifies the date a buyer can take control of the property. The agreement may also dictate who holds earnest money deposits and outline cancellation in clear terms. Both parties typically list any repairs the seller is responsible for, his responsibility to declare environmental hazards (such as lead), and his guarantee that no third-party security claims exist, such as a lien. In return, the buyer must legally meet his financial obligations. The contract will outline how a seller can seek legal remedies if the buyer doesn't hold up his part of the bargain.