A real estate purchase agreement can feel like a wall of text designed to make your eyes glaze over. But once you know what you’re looking at, it becomes a practical roadmap: who’s buying, who’s selling, what’s being sold, what it costs, when it closes, and what happens if something goes sideways.

This guide breaks down the most common clauses you’ll see in a purchase agreement—especially in residential deals, but many concepts carry into commercial transactions too. The goal is simple: help you read the document like a confident adult, not like someone hoping nothing important is hiding on page 17.

One quick note: real estate contracts are highly local. The “standard form” in one city can be totally different in another, and local customs matter. Use this as a plain-English decoder ring, then get local advice when the stakes are high.

Start with the big picture: what a purchase agreement really does

A purchase agreement is not just a receipt. It’s a binding contract that sets the rules for the entire transaction. If a dispute comes up later—about repairs, timing, deposits, or whether someone can walk away—this is the first document everyone will read.

Most agreements are built around a simple trade: the buyer promises to pay a certain price under certain conditions, and the seller promises to deliver title and possession under certain conditions. The “under certain conditions” part is where all the drama (and protection) lives.

When you read, think in terms of leverage and risk. Each clause is usually answering one of these questions: Who is responsible? Who pays? Who decides? What happens if we can’t agree? What happens if a deadline is missed?

Before you zoom into clauses, check the parties and the property

Who exactly is buying and selling?

This sounds obvious, but it’s one of the easiest places for mistakes. The contract should identify the buyer and seller by their correct legal names. If someone is buying through an LLC or trust, the entity name must match official records.

If there are multiple buyers or sellers, pay attention to how they hold title (for example, joint tenants vs. tenants in common). That can affect what happens if one person backs out or passes away before closing.

Also look for signature authority. If the seller is an estate, a corporation, or someone acting under power of attorney, the agreement should reflect that and the signer should have the legal right to bind the party.

What property is included (and what’s not)?

The agreement will describe the property by address and often by legal description. The legal description matters more than the street address, because it’s what gets recorded and what title insurance relies on.

Then you’ll usually see a section on “fixtures” and “chattels” (or personal property). Fixtures are things attached to the property—think built-in cabinetry, plumbing fixtures, or a permanently installed HVAC system. Chattels are movable—like a fridge, washer/dryer, or patio furniture. The contract should clearly say what stays and what goes.

If you care about something specific, don’t assume. Spell it out. “All window coverings” can mean different things to different people. If the seller plans to take the fancy light fixture over the dining table, you want to know now, not after you move in and see a bare bulb.

Price, deposits, and how the money actually moves

Purchase price: more than just one number

The purchase price is the headline, but the agreement often breaks down how it’s paid: deposit up front, the balance at closing, and sometimes adjustments for taxes, utilities, or rents.

In some deals, the price might include credits—like a seller credit for repairs or closing costs. Those credits should be written clearly, because lenders and closing agents will rely on the contract to prepare the final numbers.

If the agreement includes escalation clauses (common in competitive markets), read them carefully. These clauses can raise your purchase price automatically based on competing offers, often up to a cap. Make sure you understand the trigger, proof requirements, and the maximum price you’re committing to.

Earnest money deposit: what it is and when you can lose it

The earnest money deposit (often just called “the deposit”) shows the buyer is serious. It’s typically held in escrow by a brokerage, lawyer, or title company. The contract should state where it’s held, when it’s due, and what happens if the deal collapses.

Here’s the key: the deposit isn’t automatically refundable. Whether you get it back depends on the contract’s contingency clauses and timelines. If you miss a deadline—say, you don’t cancel within the inspection period—you may be locked in and risk losing the deposit if you walk away.

Also check whether the deposit becomes non-refundable after certain milestones. Some agreements convert the deposit into “hard money” after inspection or financing approval. That can be reasonable, but you should be consciously choosing that risk, not stumbling into it.

Dates and deadlines: the part people underestimate

Effective date, closing date, and possession date

Most agreements have several important dates, and they’re not always the same. The effective date is usually when the last party signs. The closing date is when funds and title transfer. Possession date is when the buyer can actually move in or take control.

Sometimes possession is “on closing.” Sometimes it’s later (seller needs time to move) or earlier (rare, but possible with a pre-closing occupancy agreement). If possession is delayed, you’ll want to understand whether the seller pays rent, how utilities are handled, and what happens if they don’t leave on time.

Deadlines also control contingencies. Inspection periods, financing deadlines, appraisal timelines, and document delivery requirements can all be tied to the effective date. Put these in a calendar the moment the agreement is signed.

Time is of the essence (and why that phrase matters)

If you see “time is of the essence,” treat deadlines as hard deadlines. That phrase can change the legal consequences of being late. In plain English: if you miss a date, you may be in breach even if you’re only a day late.

Even without that phrase, deadlines still matter. But “time is of the essence” tends to reduce wiggle room. If you need an extension, get it in writing as an amendment signed by both parties.

One more nuance: sometimes the contract has built-in extension options (for example, the buyer can extend the inspection period by paying an additional fee). If those options exist, follow the exact procedure—notice method, timing, and payment instructions—so you don’t accidentally lose the right to extend.

Contingencies: your exit ramps (and your negotiation tools)

Home inspection contingency

The inspection contingency gives the buyer a window to inspect the property and decide whether to proceed, renegotiate, or terminate. The contract should specify the length of the inspection period and what counts as “notice” to cancel.

Pay attention to what the buyer can do after the inspection. Some contracts allow termination for any reason. Others require a specific defect threshold or limit what can be requested. There can also be a structured process: buyer requests repairs, seller responds, and then buyer decides whether to accept the response or walk away.

Also look for language about invasive inspections. Can the buyer test for mold, radon, or pests? Can they scope the sewer line? If the property is older, those details can matter a lot.

Financing contingency

The financing contingency protects the buyer if they can’t get a mortgage on acceptable terms. It usually has a deadline for loan approval and may require the buyer to apply promptly and provide documentation.

Read what “acceptable terms” means. Some contracts specify an interest rate cap, minimum loan amount, or maximum monthly payment. Others just say “subject to buyer obtaining financing,” which can be vague and potentially disputed.

If the financing contingency expires and you haven’t secured financing, you may be in a risky spot. Some buyers assume they can back out later if the loan falls through. Often, after the contingency deadline, the deposit is on the line.

Appraisal contingency

An appraisal contingency comes into play when the property appraises for less than the purchase price. Lenders typically won’t lend above the appraised value, so a low appraisal can force a renegotiation.

The contract should say what happens if the appraisal is low: Can the buyer terminate? Can the buyer and seller renegotiate? Does the buyer have to bring additional cash? Some agreements include an “appraisal gap” clause where the buyer agrees to cover a certain shortfall.

If you’re in a hot market and offering above asking, this clause deserves extra attention. It’s one of the most common places where deals fall apart or buyers end up paying more cash than they expected.

Sale of buyer’s property contingency

This contingency says the buyer’s obligation to close depends on selling their current home. It can be essential for cash flow, but it’s often less attractive to sellers, especially in competitive markets.

Watch for “kick-out” clauses. These allow the seller to keep marketing the home and, if they get another acceptable offer, give the buyer a short window to remove the contingency (and proceed without selling) or step aside.

If you’re using this contingency, be realistic about timelines and the odds of your current home selling quickly. It’s better to negotiate a longer period up front than to scramble for extensions later.

Title, surveys, and the question of “what are you really buying?”

Title search and title insurance

“Good title” means the seller can legally transfer ownership without hidden claims. The contract usually requires a title search and sets a process for handling title defects—like old liens, boundary disputes, or missing easements.

Title insurance protects against certain unknown issues that weren’t discovered in the search. The agreement may specify who pays for the owner’s policy, lender’s policy, or both. Customs vary widely by location.

If the contract allows the seller to cure defects, check the timing. How long do they have? Can the buyer terminate if the defect isn’t cured by closing? These details matter if something unexpected shows up.

Survey and boundary matters

A survey shows the property boundaries and can reveal encroachments (like a fence over the line), easements (like a shared driveway), or setbacks. Not every deal requires a new survey, but it’s common in commercial transactions and sometimes recommended for residential properties too.

The contract may say the buyer can object to survey issues. If so, read the objection procedure and deadlines. If you miss the window, you might be accepting a problem you didn’t intend to accept.

Boundary issues can be expensive to fix and emotionally draining to fight about later. If anything about the lot lines, access, or shared features feels unclear, treat the survey clause as a priority.

Disclosures and representations: what the seller is (and isn’t) promising

Seller disclosure forms and known defects

Many jurisdictions require sellers to provide a disclosure statement about known issues—water leaks, foundation problems, electrical concerns, prior insurance claims, and so on. The purchase agreement may incorporate these disclosures by reference.

Read the disclosure language carefully. Sellers often disclose what they know, not what they “should” know. If a seller says “unknown,” it doesn’t necessarily mean the issue doesn’t exist—it may mean they never investigated.

If the disclosure conflicts with what you see during the inspection, address it quickly. Your contract rights often depend on raising issues within a specific time frame.

Representations about the property’s condition

Some agreements say the property is sold “as is.” Others include limited promises, like that systems will be in working order at closing or that the seller hasn’t made unpermitted alterations.

Even with “as is” language, sellers may still be responsible for fraud or intentional misrepresentation. But proving that later is hard and expensive. It’s better to rely on inspections and clear contract terms than on the hope that you can sue if something is wrong.

Also look for language about repairs prior to closing. If the seller agrees to fix something, the agreement should specify who chooses the contractor, whether permits are required, and whether receipts or proof of completion must be provided.

Repairs, credits, and the art of negotiating after inspection

Repair requests: keep them specific and realistic

After the inspection, buyers often submit a repair request. The contract may limit requests to “material defects” or allow broader requests. Either way, clarity wins: list the issue, the location, and what outcome you want.

Many sellers prefer offering a credit rather than managing repairs. Credits can be simpler and reduce disputes about workmanship, but they can also run into lender rules. Some lenders cap credits or require specific documentation.

If you do agree to repairs, consider a re-inspection right. It’s much easier to confirm the repair was done properly before closing than to chase it afterward.

Holdbacks and escrow for unfinished work

Sometimes a repair can’t be completed before closing—weather delays, contractor scheduling, or permit timelines. In those cases, parties may use a holdback: a portion of the seller’s proceeds is held in escrow until the work is completed.

The contract (or an amendment) should specify the amount held back, the deadline for completion, who verifies completion, and what happens if the deadline is missed. Without clear rules, holdbacks can turn into messy fights.

Holdbacks are more common in commercial deals, but they can show up in residential transactions too—especially when there’s exterior work or specialty repairs.

Closing costs, prorations, and adjustments: the hidden math

Who pays what?

Closing costs can include lender fees, title fees, escrow fees, recording fees, transfer taxes, attorney fees, inspections, and more. The purchase agreement typically allocates responsibility—or says it will follow local custom.

Don’t assume “custom” will match what you expect. If you’re comparing offers as a seller, net proceeds matter more than headline price. If you’re a buyer, cash-to-close matters just as much as the purchase price.

Also watch for special assessments or HOA transfer fees. Those can be significant and often surprise first-time buyers.

Prorations for taxes, utilities, and rents

Prorations adjust costs so each party pays their fair share up to the closing date. Property taxes are a big one. Depending on the jurisdiction, taxes may be paid in advance or in arrears, which affects the direction of the adjustment.

Utilities can be prorated too, especially in multi-unit properties where tenants reimburse costs. If you’re buying a rental property, rent prorations and security deposit transfers should be clearly described.

These adjustments show up on the closing statement. The purchase agreement is the blueprint, so if something feels off at closing, you can trace it back to the contract language.

Default and remedies: what happens if someone doesn’t perform

Buyer default: deposit forfeiture and beyond

If the buyer breaches the contract—by failing to close without a valid contractual excuse—the seller may be entitled to keep the deposit as liquidated damages. Many agreements specify that the deposit is the seller’s sole remedy, but not always.

Some contracts allow the seller to pursue additional damages or even “specific performance” (forcing the buyer to close). In residential deals, sellers more commonly keep the deposit and move on, but the contract language matters.

Also pay attention to notice requirements. A seller may need to provide written notice of default and an opportunity to cure before exercising remedies.

Seller default: getting your deposit back and forcing performance

If the seller fails to close—maybe they can’t deliver clear title, or they simply change their mind—the buyer’s remedies may include getting the deposit back, reimbursement of certain expenses, or pursuing specific performance.

Specific performance is more common as a buyer remedy because real estate is considered unique. But whether it’s realistic depends on the situation and local law.

Practical tip: if the seller’s ability to perform is uncertain (for example, they need to clear a lien, resolve a boundary issue, or obtain a payoff), you want strong contract language and clear deadlines for curing problems.

Special clauses that deserve extra attention

Financing addenda, lender requirements, and surprises late in the game

Many purchase agreements incorporate addenda tied to financing type: conventional, FHA, VA, or private lending. These addenda can add inspection requirements, appraisal rules, and restrictions on seller credits.

It’s also common for lenders to require certain repairs before funding. Even if the buyer is okay with a defect, the lender might not be. That’s why it’s smart to treat lender-required conditions as part of your risk planning.

If you’re a seller, be mindful of clauses that let the buyer extend closing due to lender delays. Some flexibility is reasonable, but unlimited extensions can leave you stuck in limbo.

Assignment clause: can the buyer transfer the contract?

An assignment clause says whether the buyer can assign the agreement to someone else—like another individual, an LLC, or an investment partner. Investors often want assignment flexibility; sellers often prefer to know exactly who they’re dealing with.

If assignment is allowed, check whether the original buyer remains liable. Some contracts allow assignment but keep the original buyer on the hook if the assignee fails to close.

If you’re a buyer planning to purchase through a different entity later, address it early. Last-minute entity changes can trigger lender issues, title issues, or seller suspicion.

Attorney review clause (where applicable)

Some jurisdictions or contract forms include an attorney review period. This gives the parties a short window to have counsel review the contract and propose modifications or cancel.

If you have this clause, use it. It’s one of the few built-in chances to adjust terms before you’re fully locked in. Waiting until after inspection or financing can be too late to fix structural issues in the agreement.

Even if there’s no formal attorney review period, you can still consult counsel before signing. It’s often cheaper to review a contract upfront than to fight about it later.

Plain-English walkthrough: how to read the agreement without missing landmines

Read it in layers, not from page 1 to page 30 like a novel

Start with the deal summary: parties, property, price, deposit, closing date, and contingencies. Make sure the big terms match what you believe you agreed to. If these are wrong, the rest doesn’t matter.

Next, go to deadlines and contingency procedures. Highlight the dates and the steps required to cancel or negotiate. Most costly mistakes come from missed deadlines or improper notice.

Then read risk-shifting clauses: “as is,” limitations of liability, dispute resolution, attorney fees, and default remedies. These clauses determine your options if things go wrong.

Translate legal phrasing into “who does what by when”

When you hit a dense paragraph, ask: What action is required? Who must do it? By what date? How must notice be delivered? What happens if they don’t do it?

For example, a clause might say the buyer must provide written notice of dissatisfaction with inspection results within X days, delivered by email to the listing broker, or the contingency is waived. In real life, that means you need to send a clear email before the deadline and keep proof.

If a clause doesn’t answer those questions clearly, it’s a candidate for revision before signing. Vague language is where disputes breed.

When it’s worth bringing in a lawyer (even if you’re used to doing deals)

Some people only call a lawyer when something is already on fire. A better approach is getting input when the contract is still flexible—especially if the property is expensive, the deal is complex, or the risk is unusually high.

If you’re dealing with commercial property, mixed-use buildings, or anything involving tenants, environmental issues, zoning questions, or complicated financing, legal review is less of a luxury and more of a seatbelt.

If you’re in Georgia and you want a sense of what specialized counsel looks like for this exact document type, an Atlanta purchase and sale agreements attorney can help interpret clauses, negotiate terms, and spot issues that don’t jump out to a non-lawyer reader.

How real estate contracts connect to bigger financial pressure (and what to watch for)

When a purchase agreement collides with financing stress

Sometimes the contract is fine, but a buyer or seller is under financial strain: a buyer’s loan approval is shaky, or a seller needs proceeds to pay off a debt by a certain date. When money pressure rises, the risk of default rises too.

Purchase agreements often include representations about the seller’s ability to convey title free of liens (except permitted ones). If the seller is behind on obligations, there may be unexpected payoffs, judgment liens, or last-minute scrambling to clear title.

If you’re worried about missed payments, workouts, or enforcement actions that could affect the transaction timeline, getting legal help for loan defaults can be the difference between a controlled resolution and a closing that collapses at the finish line.

What happens when a property is tied to a business sale

Not every purchase agreement is purely “real estate.” Sometimes the property is part of a bigger transaction: buying a retail location along with the operating business, acquiring a warehouse tied to a distribution company, or selling a building as part of an exit plan.

In those cases, the real estate contract needs to match the business deal terms—timelines, due diligence, allocation of assets, and what happens if one piece closes and the other doesn’t. It’s common to see cross-default provisions: if the business sale fails, the property sale terminates (or vice versa).

If you’re navigating that kind of combined transaction, it helps to understand the broader legal steps for selling your business so the real estate purchase agreement doesn’t accidentally create obligations that conflict with the business purchase agreement.

Dispute resolution, attorney fees, and how disagreements actually get handled

Mediation, arbitration, and court: what your contract chooses for you

Many agreements require mediation before a lawsuit. Some require arbitration. Some allow either party to go straight to court. The choice affects cost, timeline, and leverage.

Mediation is usually a structured negotiation with a neutral facilitator. It can be a great way to settle inspection disputes, closing delays, or deposit fights without spending a fortune.

Arbitration can be faster than court, but it can also limit appeals and discovery. If you’re agreeing to arbitration, make sure you understand the rules and who pays the fees.

Attorney fees clause: the “loser pays” question

Some contracts say each party pays their own attorney fees. Others say the prevailing party can recover fees. This matters because it changes negotiation dynamics if a dispute arises.

If you’re the party with less financial runway, a fee-shifting clause can be intimidating—but it can also protect you if you’re in the right and the other side is being unreasonable.

Also check whether the clause covers only litigation or also includes mediation/arbitration costs. The details can change the real-world cost of enforcing your rights.

Common “gotchas” that show up in real deals

Automatic waivers you didn’t mean to give

Many contracts say that if the buyer doesn’t object within a certain period, the buyer is deemed to accept the property condition, title, HOA documents, or other items. These are automatic waivers, and they’re easy to trigger by accident.

Set reminders for every deadline, and don’t rely on memory. Even experienced agents and investors miss dates when multiple deals overlap.

If you need more time, ask for an extension before the deadline expires. Once a waiver happens, you may have no leverage left.

Vague repair language that causes fights later

“Seller to repair roof” sounds fine until you realize nobody defined what “repair” means. Patch? Full replacement? Work by a licensed roofer? Transferable warranty? Permit required?

The more expensive the item, the more precise the language should be. Attach contractor quotes, specify materials, and require proof of completion.

When in doubt, a credit can be cleaner than a repair—assuming your lender allows it and the credit amount is enough to do the work properly.

HOA and condo documents people skip

If you’re buying a condo or a home in an HOA, the documents matter: bylaws, budgets, reserve studies, special assessments, and rules about rentals or renovations.

The purchase agreement often gives the buyer a short window to review and cancel based on HOA documents. Don’t waste that window. A surprise special assessment can change the affordability of the home overnight.

Also check whether the HOA requires an application, interview, or move-in fees. Those aren’t always obvious from the listing.

A simple checklist for your next contract review

Five minutes: verify the deal terms

Confirm names, property description, included items, price, deposit amount, and key dates. If anything is wrong, fix it before you do anything else.

Make sure any verbal promises (like “the seller will leave the gym equipment” or “the seller will fix the electrical panel”) are written into the agreement or an addendum. If it’s not written, it’s not real.

Check whether there are addenda attached. Sometimes the “real” deal terms live in the addenda, not the main form.

Thirty minutes: map the contingencies and deadlines

List every contingency, its deadline, and the exact method of notice. Put reminders a few days before each deadline.

Note any fees required to extend deadlines, and who must receive them. If the contract says the extension is only valid upon payment, treat it that way.

Identify which contingencies protect your deposit and which ones don’t. That single distinction often clarifies your true risk.

One hour: review risk and remedies

Read default provisions, dispute resolution, attorney fees, and any limitation of liability language. This is where you learn what your options are if the other side doesn’t cooperate.

Look for clauses that allow unilateral extensions, broad termination rights, or “sole discretion” decisions. Those can create an uneven playing field.

If anything feels unclear, ask for clarification in writing and consider professional review. Ambiguity is not your friend in a binding contract.

Reading a real estate purchase agreement isn’t about becoming a lawyer—it’s about understanding the rules you’re agreeing to live by for the next 30 to 60 days (and sometimes longer). Once you know where the key clauses are and how they work together, the document stops being intimidating and starts being useful.