So why do we always enter into Purchase Agreements when it comes to the buying and selling of Real Estate? It is true that a buyer could walk up to the seller, hand them an agreed upon amount of money and in return the seller could sign over the deed to the Real Estate. The sale would be done and both parties would get what they wanted, or at least what they thought they wanted. In truth, the answer is threefold.
First, as listing agents, real estate agents, and real estate brokers began to be utilized more and more regularly in both Commercial and Residential Real Estate Transactions, the use of Purchase Agreements also increased. Agents and brokers will tell you that having a Purchase Agreement protects your current and potential investment by making certain promises legally enforceable. While such a statement is in fact true, what the agents and brokers are not so likely to tell you is that using a Purchase Agreement better protects THEIR investment, as it is often the Purchase Agreement which either entitles the agents and brokers to their commission or at least better spells out what their payment will be. Thus, the Purchase Agreement is sort of like the real estate agent’s and broker’s meal tickets, and as such, agents and brokers will greatly advocate the use of Purchase Agreements.
The second reason that Purchase Agreements are usually used is the Statute of Frauds. The Statute of Frauds affects, among other things, the purchase and sale of land. The Statute of Frauds requires that any purported sale of land be expressed in writing, and that certain key terms be included in the document expressing the sale. By using a Purchase Agreement, the requirements of the Statute of Frauds are usually met as regards the sale of Real Estate. To learn more about the Statute of Frauds, look within the section Statute of Frauds, located within the Real Estate Law and Transactions section of the Practice Areas of the Gabriel Law Office PLLC, or click the linked word Statute of Frauds.
The third reason that Purchase Agreements are usually used in the Purchase and Sale of Real Estate is that by utilizing a Purchase Agreement both the buyer and the seller are likely to benefit. In the majority of cases, when the buyer and the seller prepare and execute a Purchase Agreement they take the time to describe the rights and responsibilities of each other in the proposed transaction. When this happens, there are fewer surprises for everyone involved. Buyers understand how much time they have to weigh their decision. Sellers understand what warranties they are making regarding the property. Essentially, everyone involved in the transaction is better informed about what they are doing and what their individual rights are. For this reason, as well as the two described above, the Purchase Agreement has become all but mandatory in the Purchase and Sale of Real Estate.