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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 Missouri, 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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Missouri Requirements for Real Estate Purchase Agreement

  • Statute of Frauds (Missouri Revised Statutes § 432.010)

    Real estate contracts must be in writing to be enforceable under the Statute of Frauds. In Missouri, any agreement for the sale of real property must be evidenced by a written contract signed by the parties.

  • Property Disclosure Requirements (Missouri Revised Statutes § 442.600-442.635)

    Missouri law requires sellers to provide buyers with a written disclosure statement revealing known material defects in the property. This disclosure must be provided before an offer is accepted.

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

    For properties built before 1978, sellers must disclose known lead-based paint hazards and provide buyers with a 10-day period to conduct a lead-based paint inspection.

  • Earnest Money Requirements (Missouri Revised Statutes § 339.105)

    Missouri law governs how earnest money deposits must be handled, including requirements for escrow accounts and conditions for return or forfeiture of deposits.

  • Real Estate Commission Regulations (Missouri Revised Statutes § 339.710-339.860)

    Real estate transactions involving licensed agents must comply with Missouri Real Estate Commission regulations regarding agency relationships, disclosures, and professional conduct.

  • Title Insurance Requirements (Missouri Revised Statutes § 381.011-381.412)

    Missouri law regulates title insurance policies, which protect buyers against defects in title. The purchase agreement should address title insurance requirements and who bears the cost.

  • Closing and Settlement Procedures (Missouri Revised Statutes § 442.380-442.400)

    The agreement must comply with Missouri laws regarding closing procedures, including document recording requirements and transfer of deed.

  • RESPA Compliance (12 U.S.C. § 2601 et seq.)

    Real Estate Settlement Procedures Act requires specific disclosures about the costs associated with the settlement process and prohibits certain practices in the real estate settlement process.

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

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

  • Property Tax Proration (Missouri Revised Statutes § 140.110)

    Missouri law requires proper proration of property taxes between buyer and seller at closing, which must be addressed in the purchase agreement.

  • Mechanic's Lien Provisions (Missouri Revised Statutes § 429.010-429.360)

    The agreement should address potential mechanic's liens and comply with Missouri laws regarding disclosure of potential liens from recent work on the property.

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

    FIRPTA requires withholding of a portion of the sales price when the seller is a foreign person, which must be addressed in the agreement for applicable transactions.

  • Homeowners Association Disclosure (Missouri Revised Statutes § 448.4-109)

    Missouri law requires disclosure of homeowners association information, including fees, restrictions, and governing documents, which must be addressed in the purchase agreement.

  • Financing Contingency Provisions (Missouri Revised Statutes § 432.070)

    The agreement must clearly outline financing contingencies in compliance with Missouri contract law, including timeframes and conditions for the buyer to secure financing.

  • Inspection Period Requirements (Missouri Revised Statutes § 442.600)

    Missouri law allows for property inspection periods, which must be clearly defined in the purchase agreement, including the buyer's rights to terminate based on inspection findings.

  • Electronic Signatures (Missouri Revised Statutes § 432.200-432.295; 15 U.S.C. § 7001 et seq.)

    The agreement may utilize electronic signatures in accordance with both federal and Missouri electronic transaction laws.

  • Remedies for Breach (Missouri Revised Statutes § 400.2-711)

    The agreement must specify remedies for breach that comply with Missouri contract law, including potential specific performance, liquidated damages, or other remedies.

  • Environmental Disclosure Requirements (Missouri Revised Statutes § 442.606)

    Missouri law requires disclosure of known environmental hazards, including the presence of methamphetamine production, radon, or other environmental concerns.

  • Flood Hazard Disclosure (42 U.S.C. § 4104a)

    For properties in flood zones, federal law requires disclosure of flood risks and flood insurance requirements, which must be addressed in the purchase agreement.

  • Arbitration Provisions (Missouri Revised Statutes § 435.350-435.470; 9 U.S.C. § 1-16)

    If the agreement includes arbitration provisions, they must comply with both Missouri and federal arbitration laws regarding enforceability and procedural requirements.

Frequently Asked Questions

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