What is a Real Estate Purchase Agreement?
A real estate purchase agreement is a formal contract between a buyer and seller of a particular property. The major objective of the agreement is for a seller of a property to transfer the responsibility of the property to a buyer who is willing to pay a mutually agreed upon price to purchase the property. People may also refer to the agreement as a sales contract or purchase and sales agreement.
When a buyer is interested in purchasing a property, he or she will typically ask the seller to sign the agreement after an offer has been made . If the seller accepts the offer, both parties are legally obligated to go through with the sale.
The Utah real estate purchase agreement is prepared after a seller has decided to put his or her property up for sale. Often, sellers have previously had an inspection done on the property and know exactly what repairs are needed. Real estate purchase agreements should be prepared by an experienced real estate attorney so their seller’s rights are adequately protected.
Important Components of a Utah Real Estate Purchase Agreement
Real estate purchase agreements in Utah identify both parties to the contract, the price and how it is to be paid, potential additional obligations the buyer and seller may have to each other, and any contingencies. The purchase agreement must also contain the legal description.
Buyer Obligations
As a rule of thumb, a buyer’s obligations include:
• To pay the agreed price.
• To obtain financing (according to any specified terms).
• To reasonably cooperate with the seller regarding the closing.
• To pay for any "due diligence" expenses.
• To accept responsibility for utilities after closing.
• To obtain insurance.
• To prior to closing, deposit an earnest money deposit.
Seller Obligations
As a rule of thumb, a seller’s obligations include:
• To convey title (according to any specific terms).
• To pay all costs associated with getting the parcel ready for sale.
• To provide documents as required by the real estate agent.
• To deliver the real estate in its present condition (or as otherwise agreed).
• To remain responsible for utilities until after closing.
• To immediately remove or correct any defects occurring prior to closing.
• To pay an earnest money deposit on the date of closing and to pay the agreed purchase price within ten days of the date the buyer may take possession of the real estate.
These are key terms.
Legal Requirements in Utah
In Utah, real estate purchase agreements are governed by a combination of the Utah Uniform Commercial Code (UCC) and state-specific property laws. The UCC, specifically Title 70A, Article 2 of the Utah Code Annotated, outlines general provisions for the sale of goods, and while real estate is technically not considered "goods," many of its provisions are adapted and applied to real estate sales and purchases in Utah.
One of the most significant legal requirements in Utah regarding purchase agreements is the Statute of Frauds. Under Utah Code Ann. § 25-5-101, any contract for the sale of real estate or lease of real estate with a term longer than one year must be in writing and signed by the parties. This means that in order to be enforceable, a real estate purchase agreement in Utah must be in writing, even if some provisions are conveyed verbally. Both buyers and sellers should ensure that their agreement includes all necessary details, as courts in Utah will not allow parties to rely on oral representations that contradict the terms of the written contract.
Moreover, in addition to the general requirement that real estate sales and purchases be in writing, Utah law also requires certain disclosures by the seller to the buyer. Per Utah Code Ann. § 57-1-18, sellers of residential real estate in Utah are required to fill out a Residential Property Condition Disclosure Form (RPCD). This form requires the seller to disclose any known defects or other issues related to the property being sold, including things such as structural problems, pest infestations, and concerns with the property’s plumbing or electrical systems.
It is important to note that there are exceptions to this disclosure requirement. For example, the requirement does not apply to transactions involving new construction properties, sales at a trustee’s sale, or foreclosures. Additionally, if the buyer has plans to demolish the subject property for development, then the RPCD is not required.
Overall, while the specifics of the legal requirements surrounding Utah’s real estate purchase agreements can seem overwhelming at first, they are put in place for the protection of the buyers, sellers, and agents involved in the transaction, and can help to ensure that all parties are aware of the details of the purchase and sale process.
Effective Drafting of a Real Estate Purchase Agreement
When drafting a real estate purchase agreement, it is important to do so in a manner that provides the greatest protection for your interests while representing your best interest. Do not simply copy an agreement you have used in the past or one that you find online. Every deal is different and may require slightly different language to be fully enforceable and protect your interests. In addition, the language of the laws surrounding real estate transactions are always changing. What would have been enforceable a few years ago may no longer be so.
While some clauses in a real estate purchase agreement may seem self-explanatory or something that you can just include based on common sense or common practice, there is much more nuance to the document than most people realize. Much time and professionalism goes into the drafting of a real estate purchase agreement and it truly should be handled by a professional who is experienced in such matters. An experienced real estate attorney will be able to draft a purchase agreement that will withstand the scrutiny of a judge if the deal were to fall through and you found yourself in a lawsuit.
It is also important to have clarity in your real estate purchase agreement so that your intentions are clear. A vague clause is still an enforceable clause. Enforceability just might have a very different meaning to it than what you intended. Clear language in your purchase agreement will reduce the potential for conflict later, provide greater legal protection, and provide a greater level of confidence for both parties involved in the transaction.
You may think that having legal counsel review a purchase agreement is a waste of money. You may feel confident that all of the terms are spelled out in the document. A purchase agreement is an incredibly powerful document that can have a range of impacts on your future and present financial well-being. Even small, seemingly innocuous terms can have a significant impact on whether or not the deal will close. Having a legal professional draft the agreement or review it for you before signing it can save you a lot of heartache and money in the long run.
Common Mistakes in Utah Real Estate Purchase Agreements
One of the most common questions I get is "why is it taking so long?" In Utah a full due diligence period is 30 days, and it’s extremely common to have this pushed to 45 or 60 days because the inspector can’t get you in, or the bank is taking too long to process the paperwork. It is important to understand that there are very few deadlines that the seller will tolerate. If you are under contract to purchase a home for 30 days, your due diligence or inspection period is most commonly 30 days and is non-extendable, meaning that that once day 30 hits the seller is expecting to receive either a notice to perform or a notice of nonperformance, aka a cancellation of the purchase agreement. I have lost deals with buyers who push the deadline , and have only been able to recapture the cost of the inspections or evaluations in litigation. The sellers of properties in Utah have all the power. To put it simply: avoid being the party at fault by making sure you stay on track and are ready for that due diligence deadline.
Another common pitfall is sloppy inspections. Inspections need to be done by qualified professionals, and while you can have people you know perform the inspections, it is generally a bad idea. An example of this is my neighbor, who works for a title company. I had him do my lineal foot calculations when I purchased my home. His value was off due to miscalculating the distance and I ended up paying a few thousand dollars in initial expenses to fence my yard, only to spend a few thousand more tearing down the fence and redoing it the following year. Do not delegate your responsibilities to someone who is simply doing you a favor; if you want to use your buddy make sure you have a disclaimer allowing you to move forward with another professional if you aren’t satisfied with their work.
Can I Enforce a Real Estate Purchase Agreement in Utah?
A real estate purchase agreement in Utah is typically a legally binding contract between a buyer and seller to purchase or sell a specified property within the state. If either party breaches the contract, it is important to understand the legal options that may be available to you as an buyer or seller, including how to enforce the real estate purchase agreement.
The first course of action in most cases is for the two parties to a real estate purchase agreement to negotiate a solution to their dispute amicably and without taking legal action. Solutions could include concessions by one or both parties or even renegotiation of the contract itself. If the two parties are unable to come to a satisfactory resolution, they may choose to enter into mediation. Mediation is the process of durable negotiations in order to reach an agreement with the assistance of a neutral third party known as a mediator, who can help them to explore their options. Often times, however, if the two parties are unable to agree on a solution or even enter into mediation, they may need to pursue litigation to resolve their dispute. If one party violates a material term of the sales contract, such as by failing to timely deposit earnest money or defaults on the mortgage, the other party may pursue a specific performance or rescission of contract judgment in court. A specific performance judgment forces the breaching party to complete the sale of the property according to the terms of the purchase agreement, while a rescission judgment voids the purchase agreement and restores the parties to their status before the contract was entered into.
Whether you are a buyer or a seller seeking to enforce a real estate purchase agreement in Utah, it is in your best interest to consult with an experienced attorney to fully understand the remedies under Utah law that are available to you.
Duties of the Real Estate Agent and Real Estate Attorney
In most real estate transactions, real estate agents play a crucial role in discussing terms and negotiating the sale of a property. Because this is usually the biggest purchase in an individual’s life, their help can be invaluable. Real estate agents can find out what similar houses have sold for nearby and suggest a list price. Likewise, they can assist in determining what to offer on a home, and be your voice during negotiations.
A real estate attorney can be extremely helpful when it comes to reviewing or drafting a real estate purchase and sale agreement prior to signature. A real estate attorney can also help answer questions about a contract and interpret some of the more difficult language.
Some real estate agents work with real estate attorneys so that when their clients ask their opinion , they can refer them to an attorney to fully understand a legal question or issue. Similarly, most real estate attorneys have established relationships with real estate agents, and can help advise or guide them to the appropriate specialist if a legal question arises for their client. In either case, the parties involved need to be sure that their real estate agent or attorney is licensed or qualified in their particular state.