A land purchase agreement is the first step in the purchase of a parcel of real estate, and usually occurs a few days or a few weeks before the title to the property is transferred to the buyer. If the real estate is inexpensive, you can save money by drafting the agreement yourself and having a lawyer look it over before you sign it.
The Buyer, the Seller and the Land
If the seller is a company, the agreement must correctly list the company's legal name, which might be different from its trade name. The company's legal name will be listed in its formation documents -- in the case of a corporation, in its Articles of Incorporation. The person who signs on behalf of the company must be authorized by the company to do so. An officer, a director, or someone authorized by a written and signed company board resolution will normally be sufficient. The parcel of land should not be identified by its street address, but by the property description shown on its certificate of title or filed with the county land recorder's office.
What Happens to the Earnest Money
The buyer usually deposits an amount, known as earnest money, into an escrow account as a guarantee to the seller that he will proceed with the closing. The agreement should list the amount of the earnest money and the name of the escrow agent. It should state either that the earnest money will be refunded, or that it will be deducted from the purchase price, if the buyer shows up at the closing and cooperates in the transfer of title. Otherwise, the seller may keep the earnest money.
Promises Made by the Seller
The seller typically provides certain written warranties to the buyer. The seller should warrant that she will pay all property-related expenses such as taxes and utilities up to the closing date, that she will allow the buyer to inspect the property prior to closing, and that she will transfer title to the buyer on the closing date. If these warranties are broken, the buyer will be entitled to back out of the transaction.
Contingencies for Financing
Most land purchases are accomplished with the help of a third-party lender, such as a bank. A land purchase agreement should list the total purchase price, the buyer's down payment, and the amount being financed by a third party. The buyer should have the right to back out of the transaction if third-party financing cannot be finalized by the closing date. Alternatively, the seller might agree to finance the sale himself, in which case the buyer will pay periodic installments to the seller and will not take title to the property until the last payment is completed.
Closing Date and Delay
The anticipated closing date should be listed. If either party wants the right to back out of the transaction if the closing is delayed, the statement "time is of the essence in this agreement" should be inserted into the section dealing with closing, so that either party may cancel the transaction if closing is delayed by even one day.