Sales and Purchase Agreement (SPA)

Use our purchase agreement to record the sale of an item.

purchase agreement template

Updated June 21, 2024
Written by Sara Hostelley | Reviewed by Brooke Davis

A Sales and Purchase Agreement (SPA) is a legal contract that details the agreement’s terms and conditions. It safeguards both buyer and seller by clarifying the transaction’s specifics. SPAs are particularly valuable for transactions involving real and personal property, such as homes, businesses, vehicles, and other personal items.

Are SPAs Legally Binding?

Yes, SPAs are legally binding contracts once both the buyer and seller sign them.

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Business Purchase Agreement Template

Use this agreement to record the sale of a business.

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Asset Purchase Agreement Template

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Use this agreement to record the purchase of stock.

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<a href=Commercial Real Estate Purchase Agreement Form" width="200" height="260" />

Use to purchase commercial real estate.

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What Is a Purchase Agreement?

A purchase agreement is a legal contract between a buyer and a seller. It describes the circumstances of the sale, including the property being sold and the agreed-upon purchase price.

It fulfills three main purposes:

  1. It identifies the property the seller is selling.
  2. It explains the steps necessary to complete the transaction.
  3. It outlines each party’s obligations, liabilities, warranties, and rights.

SPA vs PSA

In real estate transactions, the terms “Sale and Purchase Agreement” (SPA) and “Purchase and Sale Agreement” (PSA) are interchangeable, both referring to the same type of contract. These agreements detail the terms and conditions under which a property is to be sold and purchased.

Purchase Agreement vs. Purchase Order

A purchase order primarily signals a buyer’s intent to acquire specific items, including details such as price, quantity, and product type. It initiates the purchasing process but doesn’t finalize the terms of the sale.

A sales and purchase agreement, on the other hand, is a comprehensive and binding contract often negotiated and executed following the issuance of a purchase order. This agreement formalizes the sale, outlining the agreed-upon terms and conditions, including payment and delivery specifics.

The key difference lies in the stages of the transaction they represent: a purchase order indicates a desire to purchase, while a sales and purchase agreement cements the commitment to the transaction’s terms.

Purchase Agreement vs. Bill of Sale

A seller and a buyer sign a purchase agreement before exchanging money or property. It’s a testament between the parties to enter into a future transaction, and it helps both parties understand and agree to the decided terms.

While a purchase agreement documents a sale, a bill of sale transfers property ownership from the seller to the buyer, the parties typically sign it during the exchange of money and property, and it can serve as a receipt of the transaction.

A buyer can only use a bill of sale, not a purchase agreement, to prove property ownership.

What To Include in a Purchase Agreement

  1. Parties’ Information: Include the buyer’s and seller’s full names and contact information to identify the contracting parties clearly.
  2. Detailed Property Description: In addition to the address and legal description of the land, be as specific as possible in describing the property to ensure all parties are clear about the asset being transferred. This might include the size, shape, color, condition, and any other identifying details for personal property or real estate.
  3. Financial Terms: State the purchase price, including any deposits, down payments, or adjustments. Highlight how the purchase will be financed , whether through a third party, seller funding, or assuming the seller’s existing mortgage. Details about earnest money deposits, which demonstrate the buyer’s intent and are held in escrow, should also be mentioned, as well as whether a promissory note will be used as part of the payment structure.
  4. Inclusions with the Sale: List any appliances or fixtures that come with the property, like refrigerators, washers, dryers, or furniture, to avoid future disputes.
  5. Property Taxes: Describe any property taxes imposed by the seller on the buyer for the purchased property, including who is responsible for paying them and any proration of taxes.
  6. Representations and Warranties: Outline specific claims about the property’s condition. The seller should attest to having the legal right to sell the property and guarantee its stated condition.
  7. Contingencies: Define actions or conditions that must be met for the contract to proceed, including financing, home inspections, appraisal, and homeowner’s insurance requirements. These contingencies protect both parties from unforeseen circumstances that could impact the sale.
  8. Method of Conveyance: Specify the method for transferring the property, such as a bill of sale for personal property or a real estate deed for a home.
  9. Title and Title Insurance: Ensure there are clauses addressing the title investigation to uncover any issues with the property’s title and include the requirement for title insurance to protect against future discoveries of defects in the title.
  10. Timing and Key Dates: Clearly state key dates relevant to the sale, including a period for the buyer’s due diligence, the intended date of the final sale, and any contingency deadlines.
  11. Closing Details and Possession Dates: Indicate when the legal transfer of the property will occur and when the buyer will gain possession.
  12. Escrow Agent or Company: Identify any preferred escrow agents or companies responsible for opening and managing the escrow account.
  13. Contract Expiration: Mention the timeframe for the other party to respond to the purchase agreement offer.
  14. Termination Options: Provide clarification on the buyer’s option to retract their offer and end the contract by a specific date before closing, detailing any associated conditions or penalties.

How To Buy a House

Buying a house is a significant milestone in anyone’s life. It involves steps that demand careful planning and attention to detail. Here’s a comprehensive guide to navigating through the process smoothly.

Step 1: Assess Your Financial Situation

Before embarking on the house-hunting process, it is crucial to evaluate your finances. Understand your credit score, savings, debt-to-income ratio, and how much you can afford. This will give you a clear picture of your budget and help you set realistic expectations.

Step 2: Prequalify For a Mortgage

Securing a mortgage prequalification is an essential step. Based on your financial overview gives you an idea of the loan amount you might qualify for. This will further refine your budget and make you a credible buyer in the eyes of sellers.

Step 3: Find the Right Property

Finding the perfect property can be conducted online or through a real estate agent. To streamline your search, consider your priorities, such as location, size, amenities, and neighborhood.

Step 4: Make an Offer

When you’ve identified the perfect house that meets all your criteria, it’s essential to proceed to the next step, which involves making an offer. Consider drafting a real estate letter of intent to ensure your offer is competitive and clearly communicates your interest and conditions. This document allows you to outline the terms of your offer professionally, making it clear that you are serious about the purchase while remaining within your financial capacities.

Step 5: What Happens After You Submit An Offer?

Step 6: Mention Earnest Money Receipt

Upon agreement with the seller, an earnest money deposit is required to demonstrate your commitment to the purchase, which is typically held in an escrow account.

Step 7: Write the Purchase Agreement

This legal document outlines the terms of the sale, including the purchase price, contingencies, and closing date. It’s a crucial step to solidify your intentions and protect both parties.

Step 8: Conduct Inspections and Appraisals

Step 9: Negotiate Repairs

You may need to negotiate repairs with the seller based on the home inspection findings. This can either fix the issues or adjust the purchase price accordingly.

Step 10: Finalize Your Mortgage

Select the best mortgage option based on your financial situation. It could be a fixed-rate mortgage, an adjustable-rate mortgage, or another type that suits your needs. Ensure that all necessary documentation for loan processing is gathered and submitted.

How Can I Finance A Real Estate Purchase?

Step 11: Close the Deal

Before you finalize the transaction, perform a last walkthrough of the property. This ensures that all repairs agreed upon in the contract are completed and that the house is in the expected condition. After this, it’s time to sign the necessary documents, including the warranty deed , which legally transfers property ownership to you. Once everything is in order, you’ll close the deal and receive the keys to your new home.

Amendments, Addendums, and Disclosures

Addendums are additions to the purchase agreement and are terms that aren’t found elsewhere in the document. Contingencies are one type of purchase agreement addendum.

Here are some common addendums within a real estate purchase agreement:

Disclosures in a purchase agreement provide the buyer with information about potential property issues or other information they should know. The items outlined could impact the home’s value or legal mandates about specific safety or health problems. Some examples of disclosures include the following:

Amendments are legal documents that modify the original real estate purchase agreement. It is typically used to address unexpected changes or correct errors in the original contract. When properly created and signed, the amendment becomes a legally binding document.

Buyer Beware

When buying a home, it’s essential to understand that in some states, laws don’t require sellers to tell you about major problems with the property. This rule is known as “buyer beware” or “caveat emptor,” which means you’re buying the property in its current condition, whatever that may be.

Here’s how you can safeguard your interests: