The following is a list of key points that must be included in an Agreement to Purchase Real Estate:

Price

Specify whether an all cash payment at closing or earnest money deposit with balance due at closing. Usually need to offer deposit of 5% to 20%. The more offered in deposit, the stronger the impression you give to Seller that you are ready to close in a timely manner. All deposit money should be placed in Escrow either with a Licensed Real Estate Broker, Title Insurance Company, or Settlement Attorney.

Contingencies

Financing: Specify that the Contract may be voided and/or terms may be re-negotiated if developer cannot secure either private debt financing and/or subsidy necessary to develop project. You need to specify a date when the financing contingency is triggered. Clear Title: No Lender will close unless the borrower provides evidence of free and clear title to property. Clearly state that Lender and/or subsidy provider(s) make the final determination of acceptable title. Environmental Issues: No Lender will close unless the borrower provides evidence of no material environmental liabilities on the property.

Specify the scope of the environmental analysis (what firm will do it by what date). Specify if recommended remediation of environmental hazards exceeds $_______ then Contract may be voided and/or terms re-negotiated. Clearly state that Lender and/or subsidy provider(s) make final determination of acceptable environmental remediation.

Planning and Zoning Issues: A property loses its value if you cannot build according to your plan. Specify what zoning approvals, variances and/or conditional use permits are necessary for developing your project. Building Permits: If the Project cannot secure building permits as a result of unforeseen additional fees, contractor issues and/or lack of political support for your project, then the Contract can be voided or terms re-negotiated.

Time Table For Contingencies To Go Into Effect:

A timetable for satisfying all contingencies should be included in the Contract. All trigger dates must occur before the Closing Date.

Closing Date

The closing date should be set on a business day so that title can be recorded on the same day. Specify the total number of days from date of execution of the Contract to the date of closing. The longer the date of closing from date of execution the more likely you have less leverage to negotiate preferred terms with your seller.

Buyer's And Seller's Obligations If Cannot Close

If the Seller cannot deliver free and clear title and/or if the Seller fails to disclose material issues that concern any of the items on the contingency list, the Buyer may want to void the Contract and request release of the deposit money or re-negotiate the Contract Terms. If the Buyer fails to perform according to the Contract terms, then the Buyer forfeits their Deposit Money. Some Sellers may negotiate more severe penalties if the Buyer fails to perform.

Before signing make sure:

A real estate lawyer reviews the contract Your Board of Directors has reviewed the Contract and has passed a Board Resolution providing staff authorization to execute a Contract to Purchase Real Estate.

Make sure you know what you are agreeing to!

Download: A4. Sample Agreement to Purchase Real Estate for Development

Next: A5. Option Agreement to Purchase Real Estate Negotiation Points

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