Purchase Agreement Defined
A purchase agreement is a legally binding contract between a buyer and a seller that outlines the terms of a proposed real estate transaction. This important document acts as an offer letter from the buyer to the seller of real estate. Once the seller accepts the offer, it will be considered an executed contract.
The purpose of the agreement is to bind together the buyer and seller into a single entity for the purpose of completing the sale of real property. In the state of Ohio, an executed contract is enforceable in a court of law in the event of a breach of contract. In other words, a buyer can compel a seller to keep their part of the transaction and vice-versa.
However , a purchase agreement is also a rather complex set of terms, and if the buyer or seller makes a mistake in drawing it up, it could lead to problems later in the transaction. There are numerous areas of the document where points of contention could arise if they have not been specific enough or if the language is open to interpretation. Having the guidance of an experienced real estate attorney is critical to preventing potential issues during the sale process. An experienced real estate attorney will know how to draft a purchase agreement that leaves no room for misunderstanding or misinterpretation, thereby protecting the client in the event of a dispute.
Ohio Law Requirements
A purchase agreement for a home, condo, or other real estate in Ohio is an enforceable contract, and like any other enforceable contract, the legal requirements pertain. The Code states, "[a] contract is enforceable only if the terms of the contract are reasonably certain to enable the other party to make a determination of breach." Ohio Revised Code § 1302.11. It also makes clear that "[t]hese are the terms of a contract which must be agreed upon to constitute an enforceable contract: (A) Identification of the parties; (B) A legal description and terms of any real property included; (C) Identification of goods including, but not limited to, (1) Descriptions by category, kind, or quantity and (2) Identification by compliance with provisions of the uniform commercial code or provisions applying to bulk sales or conformity to shipping or customary usage or practices; (D) Contract terms concerning the any other subject matter; and (E) The price." Id. at § 1302.11. Additionally, the statute of frauds applies to Purchase Agreements in Ohio: No action shall be brought whereby to charge the defendant upon a special promise to answer for the debt, default or miscarriage of another person, or to charge any person upon a promise to answer for the debt, default or miscarriage of another, unless the promise upon which the action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged, or some other person thereunto by him lawfully authorized in writing; or unless the cause of action, upon which the action is brought, is upon a sale made by the plaintiff of an interest in land by the plaintiff to the defendant, or by the defendant to the plaintiff. Ohio Revised Code § 1335.05. Similar to the statute of frauds, Ohio Revised Code § 5301.01 provides that the "following are requisite to a conveyance of any real estate or interest therein: (A) Identification of the grantor and grantee; (B) A description of the real estate sufficient for identification; (C) Words of conveyance; (D) Execution by the grantor; (E) Delivery by the grantor." Even though it is not a requirement of Ohio law, best practices suggest that a Purchase Agreement should be in writing.
Essential Features of an Ohio Purchase Agreement
An Ohio purchase agreement should include the following key components:
Buyer’s Identity: Use the full legal name of the person or entity purchasing the property. More than one name can be included on this line.
Seller’s Identity: Use the full legal name of the seller on this line. An individual can also be a sole proprietorship. The sellers legal name may be different from the name used in the purchase application with the HOA or condo association.
Property Description: Write the full legal description of the property in the appropriate section of the Ohio purchase agreement. This information is located on the survey or deed and should be the same as the information the HOA or condo association has on file. Include the full street address in the designated space as well as any other descriptive information and attach a copy of the property record card or a copy of the listing property description provided by your listing agent.
Sale Price: Clearly show the sale price of the property and how the seller will be paid the proceeds of the sale. If the sale involves financing, indicate it in this section of the Ohio purchase agreement. Alternatively, if there is not enough to go around, you should cross out those spaces and write it in next to each other. Make sure there are no mistakes.
Representations by the parties: Carefully review the representations made by each side. If you have any questions, ask an attorney before signing the Ohio purchase agreement.
Contingencies: Make sure all contingencies are accurately and clearly stated in the Ohio purchase agreement. If a condition exists that is not specifically included in the contract, you and the seller must mutually agree on the terms of the contingent conditions in question and edit the contract accordingly.
Typical Contingencies Found in Ohio Contracts
Financing Contingencies
It’s not unusual for a covenant stating that the buyer could only close on the property if they were able obtain a loan. If the buyer already has the cash to purchase the property, this clause is not necessary.
Inspection Contingencies
If you were purchasing a fixer-upper you might want to know if the actual repairs would cost more than you initially budgeted for. You could investigate by conducting an inspection of the structure.
Appraisal Requirements
Some contingencies stipulate that the buyer must obtain an appraisal showing that the property is actually worth the amount listed in the sales contract.
Role of the Real Estate Agent
The involvement of a real estate agent can prove invaluable to buyers and sellers in Ohio. An agent serves as the professional intermediary in the preparation and negotiations of all issues related to the purchase agreement. They understand common practices and assume the role of advocate for their clients.
Agents are often able to secure reasonable terms for both parties, helping to establish terms regarding purchase price, inspections , contingencies, closing costs and earnest money. For example, if a seller makes a request of a buyer for an unreasonable amount of earnest money, most agents will advise the seller to reduce their request. A full-time, practicing real estate agent is generally knowledgeable enough to avoid many of the pitfalls of DIY sale without the need for legal intervention. However, there are situations where the need for a lawyer may be required.
Advice for Buyers and Sellers in Ohio
Both buyers and sellers should conduct thorough due diligence before signing a purchase agreement. Buyers should obtain a copy of the seller’s property disclosure, review the contents, and be sure that they are comfortable with any issues identified. Buyers should also consider having a professional home inspector complete an inspection of the property prior to closing, and sellers may want to consider obtaining a pre-listing inspection, which can reassure buyers about the condition of the property.
Buyers should also be aware of legal issues that could arise in the course of the transaction. For example, if a contract is concluded by email, the buyer should determine whether the contract is valid under Ohio law. Disputes between buyers and sellers often center on whether discrepancies exist between the written terms of the purchase agreement and the parties’ actual intentions. As a result, buyers and sellers should ensure that all of their negotiations are clearly documented in writing so that there will not be any confusion later.
Buyers and sellers also should be aware of local laws that might affect their rights. For example, landlords and renters are subject to various laws, and buyers should make sure they understand the status of any tenants. Buyers should ensure that any tenants are properly notified prior to closing and be prepared to enforce lease obligations prior to closing if necessary.
Buyers and sellers also should agree on appropriate dates for activities that are necessary prior to closing, such as making mortgage applications, ordering inspections, and scheduling closing dates. These dates should be included in the final purchase agreement. Additionally, purchasers should confirm that the seller has taken the necessary steps to clear any restrictions on the transfer of the property, such as satisfying the terms of any existing mortgages.
Finally, buyers and sellers also should hire experienced attorneys to review the purchase agreement and to help ensure that their interests are adequately protected. While buyers and sellers are not required to hire attorneys in order to complete some transactions, having an attorney involved in the preparation and negotiation of the purchase agreement can help ensure that all parties are protected in the event of a dispute.
Avoiding Mistakes
Like any area of law, it is important when drafting an Ohio purchase agreement, as an example form, you are watching out for common mistakes that can complicate any sale and cause future problems. Pointing out those problems here will help you avoid them.
Of course, while we all try to be complete and thorough and not make mistakes like these, that is impossible and the best we can do is try to avoid common mistakes so we do not have to deal with future problems.
One issue we frequently see in Ohio purchase agreements is the agreement was made between the wrong parties. Where one of the parties is a corporation, therefore, a corporate officer would sign the document as opposed to just Joe Smith (Company name), or just Jane Doe (single), even if she is married. The title to the property being sold may be in the name of the individual or the spouse and require both to sign the Ohio purchase agreement.
Another common pitfall is not recognizing what is more marketable in that neighborhood. If the house across the street sold for $250,000, why are you buying the same house for $300,000? You might make some upgrades but clearly the previous owner agreed with you that there was something about the property that did not warrant a higher sale price. Once again, the opinion of a Realtor could help you in this analysis.
Another mistake is show the wrong intention on how much you are putting down. If you are going to be getting a gift and you state you will use your bonus below the $10 , 000 required by the lender to approve the sale, you are not saying what you intend to do. A better way to say this is "Buyer(s) to provide $10,000 or the balance of their down payment to be gift {Source}." This does not restrict the purchaser from coming up with the balance of the funds. Do not limit yourself if and when you want to make the purchase.
Almost every buyer of Ohio residential property knows the cost of the sale and they try to save money at closing. Be aware that these fees have to be paid. The sale is not going to get better just because the parties to the sale do not pay certain fees. The title clerks and closing agents have to be paid and the lender has to be paid. If you cannot afford these fees and do not have the funds, you probably should not be buying a house. Save up your funds and then you can go shopping for your dream home.
Finally, there are other items that really require the attention of a person in the professional position now held by the writer of this article. Taking shortcuts will almost always result in problems. For example, if actors are not reading their lines properly, the show will be bad. It is good the Ohio legislature has a statute that requires a real estate closing attorney to provide an itemized settlement statement to the parties. That means that if there is a problem with how the costs were all bunched into one line item, there is a statutory violation giving the homeowner a reason to file suit against the lawyer.
