Skip to content

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.

0/5000

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

Open the Real Estate Purchase Agreement guide

Customize your Real Estate Purchase Agreement Template with DocDraft

Illinois Requirements for Real Estate Purchase Agreement

  • Illinois Real Estate License Act Compliance (225 ILCS 454)

    The agreement must comply with the Illinois Real Estate License Act of 2000, which governs real estate transactions and the conduct of real estate professionals in the state.

  • Property Disclosure Requirements (765 ILCS 77/)

    Sellers must provide a Residential Real Property Disclosure Report to buyers, disclosing known material defects in the property as required by the Illinois Residential Real Property Disclosure Act.

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

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

  • Illinois Radon Awareness Act (420 ILCS 46/)

    Sellers must provide buyers with the Illinois Radon Awareness Act disclosure form and the Illinois Emergency Management Agency's pamphlet on radon testing.

  • Statute of Frauds (740 ILCS 80/2)

    Real estate contracts must be in writing to be enforceable under Illinois' Statute of Frauds, which requires certain contracts, including those for the sale of land, to be written.

  • Legal Description Requirement (765 ILCS 5/)

    The agreement must contain an accurate legal description of the property being sold as recorded in county land records.

  • Fair Housing Compliance (42 U.S.C. § 3601-3619; 775 ILCS 5/3-101)

    The agreement must comply with federal and state fair housing laws, which prohibit discrimination based on race, color, religion, sex, disability, familial status, national origin, and in Illinois, additional protected classes.

  • Illinois Good Funds Law (215 ILCS 155/26)

    Compliance with Illinois' Good Funds law, which regulates the types of funds that title companies and closing agents can accept for real estate closings.

  • Property Tax Prorations (35 ILCS 200/)

    The agreement must address how property taxes will be prorated between buyer and seller at closing, in accordance with Illinois custom and practice.

  • Transfer Tax Disclosure (35 ILCS 200/31-1 et seq.)

    The agreement should specify responsibility for payment of state and local transfer taxes imposed on the deed transfer.

  • Attorney Review Period (Illinois Common Law Practice)

    While not statutorily required, Illinois custom typically includes an attorney review period allowing legal counsel to review and propose modifications to the contract.

  • Inspection Contingency (Illinois Contract Law)

    The agreement should include provisions for property inspections and the buyer's rights if defects are discovered.

  • Financing Contingency (Illinois Contract Law)

    If applicable, the agreement should include contingencies related to the buyer's ability to secure financing for the purchase.

  • Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1101 et seq.)

    For properties in foreclosure or short sale situations, compliance with Illinois Mortgage Foreclosure Law is required.

  • Condominium Property Act Compliance (765 ILCS 605/)

    For condominium sales, the agreement must comply with the Illinois Condominium Property Act, including required disclosures of association documents.

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

    Compliance with FIRPTA, which may require withholding of tax if the seller is a foreign person.

  • Escrow Act Compliance (215 ILCS 155/)

    If earnest money is held in escrow, compliance with the Illinois Title Insurance Act regarding escrow accounts and funds.

  • Seller Financing Disclosure (15 U.S.C. § 1601 et seq.; 12 CFR Part 1026)

    If seller financing is involved, compliance with federal Truth in Lending Act and Dodd-Frank requirements for seller financing disclosures.

  • Illinois Smoke Detector Act (425 ILCS 60/)

    Compliance with requirements for functioning smoke detectors in residential dwellings at the time of transfer.

  • Carbon Monoxide Alarm Detector Act (430 ILCS 135/)

    Compliance with requirements for carbon monoxide detectors in residential units with fossil fuel burning systems or attached garages.

Frequently Asked Questions

Questions are loading.