What Is an Ohio Purchase Agreement?
What is an Ohio Real Estate Purchase Agreement?
When you buy or sell real estate, you must enter a purchase agreement with the buyer or seller to document the transaction. If you are purchasing residential property, then the purchase agreement is usually referred to as a real property purchase contract. Knowing that the seller (or buyer) is not obliged to sell (or buy) real estate unless you contact a real estate agent and secure a purchase contract emphasizes the importance of the agreement.
A purchase contract to buy real estate is governed by the Statute of Frauds. This means that any purchase agreement must be in writing and signed in order to be enforceable in Ohio. An oral agreement will not suffice. A purchase agreement that is somehow unclear may result in litigation, and the parties’ intent may be hard to determine. An unclear agreement is a recipe for disaster. Keeping this in mind , it is important to know that a valid contract must contain certain information:
- the price of the property;
- the exact description of the real estate (including any easements, fixtures, and all interests that are not explicitly reserved);
- the buyer;
- the seller;
- the closing date;
- the date of possession; and
- all contingencies (such as inspections, or advice from lenders or real estate agents.)
The purchase agreement serves to legally bind the seller into a promise to convey his or her interest in the property to you in exchange for a stated amount of cash or other consideration (such as the assumption of an existing debt on the property). The agreement will create obligations for either party. For example, the seller will be required to convey title to the property, and the buyer will be obliged to pay the stated consideration. If one or both parties breach their obligations, the law provides remedies.
Common Sections of the Agreement
While each real estate purchase agreement may have its own unique clauses, The Ohio Association of Realtors has created a standard form which is used by members. In this article, I will discuss the key components of that standard agreement. First of all, the property in question must be described in detail both in the Purchase Agreement itself and the attached Exhibits. In Ohio, it is permissible, although not usually used, to list the Property address only. However, it is much better practice to include the Parcel Identification Number (the copy of the deed will have it), a legal description of the property (found in the recorded Deed) and/or the plat which shows the Property. The reason being that the guaranteed title policy (which the seller usually provides to the buyer) will be based on the legal description. If the Parcel Identification Number is used instead of the legal description, then the buyer may not have clear title once the plat map is referenced in the Guaranteed Title Policy. You see it all the time where the description on the Plat Map does not match the street address or even the Parcel Identification Number.
Second, the Purchase Agreement must include the Purchase Price (including any deposits), when payment shall be made and what are the conditions of payment.
Third, whether either party has certain obligations under the Contract. If one party fails to abide by the Contract, then the other party may be able to sue for specific performance, or the buyer might want to be reimbursed his earnest money deposit. It is also important to know what happens to the earnest money deposit if the sale does not proceed to closing.
Fourth, the Closing date is the date the sale becomes final. Typically, this is when the Deed is recorded. If the Deed is not recorded, then the sale is not really closed. Naturally, there will be a delay between the Closing date and the actual recording of the Deed, so the parties need to discuss whether they want full possession to the Property on the Closing date or if they will wait until the Deed is recorded.
All remaining items of the Purchase Agreement are usually Self-Explanatory, however, a few of them may need to be further discussed. For example, "Contingencies" mean either (1) that the Buyer’s obligation to purchase the Property depends upon something else happening (i.e.- If the Buyer is to get financing for her mortgage, if she is to sell her current home to have more funds, etc. Then there’s the potential "required repairs" "as-is repairs" some repairs may be required before purchase while others may be the responsibility of the Buyer after Closing (this is known as taking the Property "as-is"). Finally, the title to the Property should be guaranteed and a title insurance policy should be requested.
I hope this article has helped you better understand some of the key components that go into an Ohio Real Estate Purchase Agreement.
Contingent Terms and Clauses
Contingencies are the conditions that must be met for the sale to move forward. In an Ohio real estate purchase agreement, commonly seen contingencies include the mortgage contingency (which makes financing an offer a requirement) and the inspection contingency (which allows buyers to obtain inspections with the option of canceling the real estate purchase agreement if issues arise). "As-is" purchase agreements have become more common in competitive markets; customers may choose to forego an inspection in such circumstances (although not without risk). In Ohio, sellers are not legally bound to disclose the need for an inspection item unless it is a lead-based item that requires them by law to do so. However, if they fail to disclose a defect or largely cosmetic repair became an issue after the closing, and such defect is revealed later, the buyer would have very limited legal options available to them. Then there are clauses that are simply added for clarity, such as the personal property clause noting that a seller is not including a lawn mower with the sale of the home or the HOA clause that notes the home is subject to a homeowner’s association.
Attorneys and Real Estate Agents in an Ohio Purchase Agreement
Whether you’re a buyer or a seller, the assistance of an attorney and/or your real estate agent can be invaluable when it comes to drafting and reviewing a purchase agreement. Your attorney can help you draft a purchase agreement that meets your needs and protects your interests. If you’re representing yourself, the assistance of an attorney can be even more critical, as real estate law can get complicated quickly. If you have questions about the terms of the agreement or how to protect yourself in a real estate transaction, an experienced real estate attorney can provide key advice and assistance throughout the process. And if you do end up in a dispute with the other party, an attorney can help you understand your rights under the terms of the agreement and provide representation if it is needed to enforce those rights. It’s also important for buyers and sellers to have their agents review the draft and final versions of any deals to make sure they are compliant with applicable state laws. Agents can also help you negotiate deal terms with the other party to reach a firm agreement. While there is a good deal of freedom with purchase agreements, there are some local and state laws that need to be followed in Ohio. For example, purchasing real estate can have significant tax implications, which is why you should work with an attorney to understand the specific language in the contract.
Completing a Purchase Agreement in Ohio
Upon reaching an agreement, the seller and buyer will sign the agreement, and the buyer will pay the purchase price. The buyer may then take possession of the property.
However, finalizing a purchase agreement in Ohio typically involves executing a signed transfer (deed) and bringing it to the stage where it is legally effective and fully enforceable. This typically involves having the deed prepared by a real estate attorney or title company, having the contract transferred to the County Recorder’s Office or a local tax authority, filing a disclosure of a personal interest or disclosure of equity and paying any underlying taxes or fees.
The transfer must be done by a person authorized to do so by the authority in question. For example , in Franklin County, OH, such persons include the Director of Finance, the Clerk of Council, the Budget Director, or the Purchasing Agent. These persons may delegate their authority for approval of a purchase agreement to the county or city manager.
Finally, disclosure requirements may vary depending on whether the land is owned by a city, township, or county. Generally speaking, land owned by a township will require no disclosures, while a city may require either a "disclosure of personal interest" or "disclosure of equity," filed with the County Recorder’s office. Disclosure forms are typically specified by the Municipal Planning Act (Chapter 713 of the Revised Code) and the Township Zoning Code.
Common Pitfalls and How to Avoid Them
There are several common mistakes buyers and sellers should avoid when entering into a real estate purchase agreement. First and foremost, consider the closing costs to be paid at the closing. While most people know there will be costs involved, many fail to ask exactly how much or do not negotiate these costs as part of the agreement. There are many closing costs, including title insurance, attorney fees, transfer taxes, recording fees and any inspections. Ohio law allows parties to negotiate the distribution of closing costs.
Another mistake is failing to clearly delineate the contingencies of the deal. The truth is that a vast majority of real estate purchases are contingent upon the buyer securing financing. For this reason, it is necessary to make sure the seller is aware of the buyer’s need for financing. While most sales are contingent on financing, others may not be. These include cash sales, where a buyer will not need a mortgage or sale of other property, and conditional purchase agreements, where the sale is contingent on the buyer selling another property.
One of the biggest mistakes in negotiating a real estate purchase agreement is failing to agree to the commission amounts and who will pay them. It is important for buyers to understand that even if they are not using a real estate agent, they are personally responsible for paying the full amount of the broker’s commission if it is not otherwise negotiated in the agreement. The same is true for sellers, who should make sure their agent receives a pre-determined amount of any commission. However, it is important to be aware the seller is often the one who pays the entire commission out of the proceeds from the sale, regardless of who the buyer’s agent is.
It is also important to make a closing date as part of negotiations, although most real estate agents will not have difficulty proposing a date as long as it is not more than a year in the future. Many times, it is necessary to have a date somewhat closer than a year to allow time for closing inspections and any necessary repairs.
Finally, it is crucial to ensure the property description is included in the agreement. While it is sufficient to describe the property by street address, it is also advisable to include the tax key number as well as any surveys, site plans or other documents describing the location and boundaries.
By addressing potential pitfalls in advance, buyers and sellers can more confidently move forward with the transaction.
FAQs
How long does it take to execute an Ohio purchase agreement?
Ohio purchase agreements don’t have a standard timeline for acceptance and execution. Buyers often expect a response from the seller’s broker or attorney within 24 hours if the agreement is sent during the week, with a few days of grace for offers submitted on weekends. However, all parties should plan for a reasonable amount of time for the seller’s agent to present the offer to the seller and for the seller to consider all terms of the agreement .
Are there any obligations for the parties after the purchase agreement is signed?
Both parties are obligated to continue to act in good faith and with "candor, openness, and honesty" until the sale closes. Parties should also have a plan in place for how to resolve disputes that may arise.
Can terms be modified after the Ohio purchase agreement has been executed?
If both parties agree to modifications, they can sign an addendum that makes the necessary changes to the original agreement. If the parties were not able to reach an agreement, the seller would likely need to re-list the property.