Agreement to purchase property
An agreement to purchase property is a specific type of contract known as a land sale contract.
Specific requirements for land sale contracts are governed by applicable state law, but most states have certain requirements in common. Those with questions about a specific agreement to buy property should contact a real estate attorney.
Every state has some statutory form of the common-law Statute of Frauds, which requires that certain types of contracts be in writing.
Land sale contracts must be written in every jurisdiction. The contract must be signed by all parties to be bound by the contract and must contain certain crucial terms, such as the purchase price and form of payment, a clear description of the property being sold, any conditions on the sale, and identification of the buyer and seller of the property.
Even if the contract makes no promises about the state of the property's title, various jurisdictions' law will include an implied warranty of marketable title in any contract to sell land.
This warranty implies a promise from the seller to the buyer that there are no undisclosed defects in the title to the property. Title defects may comprise property liens, undisclosed mortgages, zoning violations or other encumbrances of which the buyer is not aware. However, should language in the contract negate the implied warranty of marketable title, the contract language will control.
Equitable Conversion Doctrine
The doctrine of equitable conversion is a legal doctrine that stipulates that after the signing of a land sale contract, the seller holds only legal title to the property; the buyer takes equitable title, meaning the he has true ownership of the property and the seller owns the purchase money.
Equitable conversion proves problematic in cases of property destruction (for instance, by fire) before the sale closes, because the buyer has no way to recover his purchase money. Many states have enacted laws to address this problem by making the seller responsible for damage to the property before closing.
After signing the land sale contract, parties usually enter an escrow period.
Escrow is the time between the contract execution and transfer of the property deed, a period usually used by the buyer or the parties' escrow agent to investigate title and other aspects of the property. Absent special circumstances, courts usually hold that time is not of the essence for a real estate sale. The typical escrow period lasts between 60 and 90 days.
Once the escrow period is complete, the buyer and seller can complete the sale by executing a valid deed, a legal document that effects property transfer.
Once the seller delivers the deed to the buyer and the sale is closed, the land sale contract ceases to operate, unless language in the deed references that contract. The deed itself is the legal document that controls the sale, and all conditions and promises regarding the sale should be described or referenced in the deed.