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Real Estate Purchase Agreement: Essential Guide for Landlords, Investors, and Tenants

Comprehensive guide to understanding real estate purchase agreements for tenants living in properties being sold, real estate investors with multiple rentals, and individual landlords selling rental properties.

Introduction

A Real Estate Purchase Agreement is a legally binding contract that outlines the terms and conditions of a property sale between a buyer and seller. Whether you're a tenant concerned about your living situation when your landlord decides to sell, a real estate investor expanding your portfolio, or a landlord looking to sell your rental property, understanding this document is crucial to protecting your interests and ensuring a smooth transaction. This guide breaks down the key components of a Real Estate Purchase Agreement and provides specific insights for tenants, investors, and landlords navigating property sales.

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Key Things to Know

  1. 1

    A Real Estate Purchase Agreement is legally binding once signed by all parties, so review it carefully or have an attorney review it before signing.

  2. 2

    Tenants generally maintain their rights under existing leases when a property is sold, as the new owner must honor the terms until the lease expires.

  3. 3

    Contingencies protect buyers by allowing them to back out of the deal under specific circumstances without losing their earnest money.

  4. 4

    Landlords selling rental properties must disclose existing leases, security deposits, and any known property defects to potential buyers.

  5. 5

    Real estate investors should include contingencies for reviewing tenant payment histories, lease agreements, and property financial records.

  6. 6

    The purchase agreement should clearly state whether the property will be delivered vacant or with tenants in place at closing.

  7. 7

    Security deposits must be transferred from the seller to the buyer at closing, with proper accounting and notification to tenants.

  8. 8

    Financing for investment properties typically requires larger down payments and carries higher interest rates than primary residence loans.

  9. 9

    Local landlord-tenant laws may impact how a property sale can proceed, including requirements for tenant notification and rights of first refusal.

  10. 10

    Tax implications of selling rental property differ significantly from selling a primary residence, including potential capital gains tax and depreciation recapture.

Key decisions before you file

Before you file a Real Estate Purchase Agreement in Florida, a few decisions shape the document: which option to choose and what each one means. The Real Estate Purchase Agreement guide walks through them.

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Florida Requirements for Real Estate Purchase Agreement

  • Statute of Frauds (Florida Statutes § 725.01)

    Real estate contracts must be in writing to be enforceable under the Statute of Frauds, which requires certain contracts to be written and signed by the parties to be bound.

  • Property Disclosure Requirements (Florida Statutes § 689.261)

    Sellers must disclose known material defects that affect the property's value and are not readily observable to buyers, including information about the property's condition, defects, and other material facts.

  • Radon Gas Disclosure (Florida Statutes § 404.056(5))

    Florida law requires that real estate contracts include a notification about radon gas, informing buyers that radon is a naturally occurring radioactive gas that may present health risks.

  • Homeowners' Association Disclosure (Florida Statutes § 720.401)

    Sellers must provide buyers with information regarding any homeowners' association, including governing documents, financial information, and any pending special assessments.

  • Condominium Disclosure Requirements (Florida Statutes § 718.503)

    For condominium sales, sellers must provide specific disclosures including the declaration of condominium, articles of incorporation, bylaws, and financial information of the association.

  • Lead-Based Paint Disclosure (42 U.S.C. § 4852d; 24 CFR Part 35; 40 CFR Part 745)

    For properties built before 1978, sellers must disclose known lead-based paint hazards and provide buyers with an EPA-approved lead hazard information pamphlet.

  • Financing Contingency (Florida common law; no specific statute)

    The agreement should include provisions regarding the buyer's ability to secure financing, including timeframes and conditions under which the buyer may terminate if financing cannot be obtained.

  • Inspection Contingency (Florida common law; no specific statute)

    The agreement should outline the buyer's right to inspect the property, the timeframe for inspections, and the process for requesting repairs or terminating the contract based on inspection findings.

  • Title Insurance and Examination (Florida Statutes § 627.7843)

    The agreement should address title insurance requirements, who pays for the policy, and the process for resolving title defects discovered during the examination period.

  • Foreign Investment in Real Property Tax Act (FIRPTA) (26 U.S.C. § 1445)

    For sellers who are foreign persons, the agreement must address FIRPTA withholding requirements, which may require the buyer to withhold a percentage of the purchase price.

  • Closing Costs and Prorations (Florida common law; no specific statute)

    The agreement should specify how closing costs will be allocated between buyer and seller, and how property taxes, HOA fees, and other expenses will be prorated at closing.

  • Escrow Deposit Terms (Florida Statutes § 475.25(1)(d))

    The agreement must outline the amount of the earnest money deposit, who will hold it in escrow, and the conditions under which it may be released or forfeited.

  • Default and Remedies (Florida common law; no specific statute)

    The agreement should specify what constitutes default by either party and the remedies available, including liquidated damages, specific performance, or other legal remedies.

  • Risk of Loss (Florida Statutes § 689.28)

    The agreement should address who bears the risk of loss if the property is damaged between contract signing and closing, and the buyer's rights in such situations.

  • Coastal Construction Control Line (Florida Statutes § 161.57)

    For properties near the coast, the agreement must disclose if any portion of the property is seaward of the coastal construction control line and the implications for development and insurance.

  • Energy Efficiency Rating Disclosure (Florida Statutes § 553.996)

    Sellers of newly constructed residential buildings or existing residential buildings must provide an energy efficiency rating to prospective buyers if requested.

  • Fair Housing Act Compliance (42 U.S.C. § 3601-3619)

    The agreement and transaction must comply with federal Fair Housing Act prohibitions against discrimination based on race, color, national origin, religion, sex, familial status, or disability.

  • Real Estate Settlement Procedures Act (RESPA) (12 U.S.C. § 2601 et seq.)

    The transaction must comply with RESPA requirements regarding disclosure of settlement costs and prohibition of kickbacks and referral fees in real estate transactions.

  • Electronic Signatures (Florida Statutes § 668.50; 15 U.S.C. § 7001 et seq. (E-SIGN Act))

    The agreement may be executed using electronic signatures, which are legally valid and enforceable for real estate transactions under both federal and Florida law.

  • Attorney Review Period (Florida common law; no specific statute)

    The agreement may include a provision allowing parties a specified period to have the contract reviewed by an attorney and potentially request modifications.

Frequently Asked Questions

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