When you sell or purchase real estate in Iowa, you will enter a purchase agreement as part of that deal. The purchase agreement sets out all of the rights and obligations of each party in the transaction. This vital document makes the property transfer “official,” and it ensures that there is a clear understanding between everyone involved regarding how the sale will work and what will happen if certain obligations are not met.
Most important, a contract for sale/purchase of real property MUST be in writing and signed by both parties. To be valid, a purchase agreement must include several basic elements. These include the following general items.
- Identification of the parties involved
The purchase agreement should set out the names of the individuals involved in the purchase. While the transaction often simply involves individuals, especially for residential properties, there may actually be a company or other entity (such as a trust) that should be included in the sale/purchase. You should be sure you have the right parties named that hold title to the house in the purchase agreement.
You also need to set out how the new purchasers will own the property. If it includes more than one person, are they holding it as joint tenants? Tenants in common? The purchaser needs to make that type of decision before the purchase agreement is finalized. Joint tenancy is the most common form of ownership in residential real estate transactions and often the expectation for a married couple when purchasing a home.
- Description of the property being sold
You might think that simply having the address included in the agreement would be enough for a purchase agreement. However, that is not the case in Iowa. There is a more formal, legal description by which every piece of land in Iowa is known, and that legal description must be included in the purchase agreement for it to be valid and recorded properly.
- Price and term information
The purchase agreement will also include how much the real property is being sold for and any additional terms of the contract. There is often a description of where the money is coming from and how it will be paid (i.e. mortgage, cash, installment contract)
A section describing any earnest money involved is common. 0.5%-1% of the purchase price is a common amount for earnest money deposits. The agreement will often set out what will happen to this earnest money if the sale is not completed as expected.
- Closing dates and contingencies
Many times, the purchase of a new property is contingent upon some other factor. Some of the most common contingencies include getting appropriate financing for your family and selling a house that you previously owned. Obtaining a satisfactory inspection is also very common. If you cannot sell your other home or get funding, for instance, the sale cannot be completed. Those terms are often built directly into the purchase agreement.
Your contingencies will often affect the timeline for the purchase agreement. For example, you may want to push the closing date out so that you have time to arrange financing and get your current home sold. The anticipated closing date is usually included in the purchase agreement. It is common for the closing on your current home to occur on the same day as the closing for the new home you are purchasing.
- Tax information and other miscellaneous items
Virtually anything you can think of regarding the transaction can (and often should) be included in the purchase agreement. Taxes are one such item. Sellers will generally pay the taxes owed through the date of the sale.
Assessments, homestead classifications, information regarding fixtures and appliances, window treatments, and a lot more can be included in your purchase agreement. Your unique situation will dictate what items are important or necessary for you.
Let Danilson Law help you create a purchase agreement that meets your needs. Oftentimes, a stock agreement simply will not work for you. Call us today to learn more about how we can help with your sale or purchase of your new home.
