What is a real estate purchase agreement?

What you'll learn ✅

• What a real estate purchase agreement contains and why it matters
• How contingencies protect buyers — and when they can be waived
• What happens after both parties sign
• How your mortgage and pre-approval connect to the contract

A real estate purchase agreement is a legally binding contract between a buyer and seller that locks in the agreed-upon terms of a home sale — including the purchase price, closing date, contingencies, and financing details. Once both parties sign, the property is considered "under contract." Understanding what's in it before you sign can prevent costly surprises at closing.

Get pre-approved in as little as 3 minutes — no credit impact

What does a real estate purchase agreement include?

A purchase agreement covers far more than the sale price. Every clause has real consequences, so it's worth knowing what you're looking at before you sign.

The core components found in nearly every agreement include:

• Purchase price — The total amount the buyer agrees to pay.
• Buyer and seller information — Full legal names of all parties.
• Property description — Legal address, parcel number, and lot details.
• Closing date — The target date for completing the transaction and transferring ownership.
• Earnest money deposit — A good-faith deposit, typically 1–3% of the purchase price, held in escrow. Learn more about what earnest money is and how it works.
• Financing terms — Whether the buyer is paying cash or obtaining a mortgage.
• Contingencies — Conditions that must be satisfied before the sale can close (detailed below).
• Included fixtures and appliances — What stays with the home and what the seller is taking.
• Possession date — When the buyer takes physical possession, which may differ from closing.
• Seller disclosures — Required disclosures about known defects or material facts. Requirements vary by state.

What are contingencies in a purchase agreement?

A contingency is a condition that must be satisfied before the sale can close. If a contingency isn't met, the affected party generally has the right to exit — sometimes without penalty.

The three most common are the financing contingency (protects the buyer if their mortgage falls through), the inspection contingency (allows the buyer to negotiate or exit after a home inspection reveals issues), and the appraisal contingency (protects the buyer if the home appraises below the purchase price — learn more about how the appraisal contingency works).

In competitive markets, buyers sometimes waive contingencies to strengthen their offer. That carries real risk. Waiving the financing contingency means you're obligated to close even if your loan falls through. Waiving the inspection contingency means buying as-is, with no recourse for defects found later. Talk through any waiver with your agent before agreeing to it.

Who prepares a purchase agreement?

The buyer's real estate agent typically drafts the agreement using a state-approved standardized form. The seller can accept, reject, or counter. Until both parties agree to the same terms in writing, no binding contract exists — negotiations can go multiple rounds.

A few states, including New York, New Jersey, and Illinois, require attorney review after signing. In those markets, both sides have a short window — usually a few business days — to have a licensed attorney review and request changes. If you're buying in one of those states, that review period is a built-in protection worth using.

What happens after you sign?

The period between signing the purchase agreement and closing typically runs 30–45 days. During that window, a lot is happening simultaneously.

The buyer submits their earnest money deposit, schedules the home inspection, and works closely with their lender to finalize mortgage approval. The lender orders an appraisal, and a title company conducts a title search to confirm there are no liens or ownership disputes. Throughout this period, the buyer should avoid opening new credit accounts or making large purchases — anything that shifts your debt-to-income ratio can affect final loan approval.

"Under contract" is not the same as "closed." Either party can still exit if a contingency isn't satisfied. Missing a contingency deadline can waive your rights, so stay on top of the timeline your agent lays out. Review what closing costs you'll owe so there are no surprises on closing day.

Can you back out of a purchase agreement?

Yes — under certain conditions. If a contingency isn't satisfied (the inspection turns up a major issue, the appraisal comes in low, the loan is denied), the buyer can typically exit and recover their earnest money.

Backing out without a valid contingency is a different story. In most cases, the buyer forfeits their earnest money deposit. The seller may also have grounds to pursue additional damages depending on the contract terms and state law. If you're unsure whether you have a valid exit, a real estate attorney is the right call.

Sellers can exit too, though their options are more limited. A seller who backs out without cause may be required to return the earnest money and could face legal action from the buyer.

How your mortgage fits into the purchase agreement

Most purchase agreements include a financing contingency, which means the deal depends on the buyer successfully obtaining a mortgage. Once you're under contract, your lender needs the executed agreement to begin underwriting. That kicks off appraisal ordering, income verification, and final loan approval — all of which need to happen before the closing date.

This is why getting pre-approved before you make an offer matters. A pre-approval letter tells the seller your financing is already vetted, which reduces their perceived risk. It also means you're not scrambling to start the mortgage process after the contract is signed. Understand the difference between pre-qualified vs. pre-approved before you start shopping — they're not the same thing.

The good news is that nearly 8 out of 10 people who apply for a loan with Better get approved¹, and when they do, Better closes 99%+ of customers on time.²

Getting pre-approved early gives the whole transaction a stronger foundation, as well as makes your offer stronger in the first place.

If you want to understand the full arc of the process, the steps to buying a house lays it out clearly. You can also use the mortgage calculator to get a realistic picture of your monthly payment before you're ever sign a purchase agreement.

Takes as little as 3 minutes. No impact to your credit score to start.

Frequently asked questions

Is a real estate purchase agreement the same as a sales contract?

Yes. A real estate purchase agreement is also commonly called a real estate sales contract, a home purchase agreement, or a purchase and sale agreement. The name varies by region, but the document serves the same purpose: it's the binding contract that governs the terms of a home sale.

How long do you have to sign a purchase agreement after an offer is accepted?

Once a seller accepts an offer verbally or in writing, the timeline to formalize the agreement depends on your state and the terms of the offer itself. In most cases, both parties sign within 24–72 hours. Your agent will set a deadline in the offer.

What happens if a home doesn't appraise at the purchase price?

If the appraisal comes in below the agreed price and the contract includes an appraisal contingency, the buyer can renegotiate the price, pay the difference in cash, or exit the deal. Without that contingency, the buyer typically must cover the gap or lose their deposit.

Can a seller back out of a purchase agreement?

Sellers have fewer clean exit options than buyers. If a seller backs out without cause, they're generally required to return the earnest money and may face legal liability. Some contracts include specific seller termination rights — review yours carefully.

Do you need a lawyer to review a purchase agreement?

In most states it's not legally required, but in some — including New York, New Jersey, and Illinois — attorney review is a standard part of the process. Even where it's optional, having an attorney review the contract before you sign is worth considering, especially for high-value transactions or complicated terms. You can also learn how to get pre-approved for a mortgage to make sure your financing is solid before any contract is signed.

The bottom line

A real estate purchase agreement is a serious legal document — not a formality. Read it carefully, ask questions about anything unclear, and enter the process with your financing already in order. The stronger your pre-approval, the smoother the period between signing and closing tends to go.

Get pre-approved in as little as 3 minutes.

¹ Based on Better Mortgage internal analysis of 2025 HMDA-reported mortgage application data. The approval rate reflects applications received between January 1, 2025 and December 31, 2025 that were considered "completed," meaning applications not withdrawn by the applicant or closed for incompleteness. Approval includes applications that were approved but not accepted, loans that ultimately originated, and loans that were approved and later purchased. Results are based on aggregate data and do not guarantee approval for any individual applicant. Approval outcomes depend on a variety of factors, including credit profile, income, assets, property details, and underwriting requirements. Individual results may vary.

² Based on an internal analysis of purchase mortgage loans that closed with Better Mortgage between October 2023 – January 2024. Excludes loans that did not close on the specified closing date as stated in the purchase agreement where the delay was attributable to the acts or omissions of the borrower(s), the seller(s) or a third party, or due to any other factors outside of Better Mortgage's control.