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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 New Hampshire, 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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New Hampshire Requirements for Real Estate Purchase Agreement

  • Statute of Frauds (NH RSA 506:1)

    Real estate purchase agreements 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 (NH RSA 477:4-c, 4-d)

    Sellers must disclose known material defects about the property's condition that could affect its value or desirability, including water supply, sewage disposal system, insulation, and structural components.

  • 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 a 10-day period to conduct a risk assessment or inspection for lead-based paint hazards.

  • Water Supply and Sewage Disposal Disclosure (NH RSA 477:4-c, 4-d)

    Sellers must disclose information about the type, size, and location of private water supply and sewage disposal systems serving the property.

  • Radon Gas Disclosure (NH RSA 477:4-a)

    Sellers should disclose known information about radon gas levels on the property, as New Hampshire has high radon potential in many areas.

  • Real Estate Transfer Tax (NH RSA 78-B)

    The agreement must address payment of the New Hampshire Real Estate Transfer Tax, which is assessed at a rate of $0.75 per $100 of the sale price, typically split between buyer and seller.

  • Broker Disclosure (NH RSA 331-A:25-b)

    Real estate brokers must disclose their agency relationships and whom they represent in the transaction (seller, buyer, or dual agency).

  • Condominium Disclosures (NH RSA 356-B:58)

    For condominium sales, sellers must provide specific disclosures including condominium documents, bylaws, financial statements, and information about the condominium association.

  • Financing Contingency (NH Common Law)

    The agreement should include provisions regarding the buyer's ability to secure financing and the consequences if financing cannot be obtained within a specified timeframe.

  • Inspection Contingency (NH Common Law)

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

  • Title Examination and Insurance (NH RSA 477:32)

    The agreement should address the process for examining title to ensure marketable title, resolving title defects, and obtaining title insurance.

  • Deed Requirements (NH RSA 477:27-28)

    The agreement should specify the type of deed to be delivered at closing (warranty, quitclaim, etc.) and ensure compliance with New Hampshire deed requirements.

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

    If the seller is a foreign person, the agreement must address FIRPTA withholding requirements, which may require the buyer to withhold 15% of the purchase price.

  • Closing Date and Possession (NH Common Law)

    The agreement must specify the closing date and when the buyer will take possession of the property, including provisions for pre-closing occupancy or post-closing tenancy if applicable.

  • Risk of Loss (NH RSA 477:27)

    The agreement should address which party bears the risk of loss if the property is damaged between the agreement date and closing date.

  • Default Provisions (NH Common Law)

    The agreement should specify remedies available to the non-defaulting party if either buyer or seller fails to perform their obligations under the contract.

  • Earnest Money Deposit (NH RSA 331-A:13)

    The agreement should address the amount, holder, and disposition of the earnest money deposit, including conditions for its return or forfeiture.

  • Fair Housing Compliance (42 U.S.C. § 3601-3619; NH RSA 354-A)

    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, age, marital status, or sexual orientation.

  • Environmental Hazards (NH RSA 485-C; 42 U.S.C. § 9601 et seq. (CERCLA))

    The agreement should address disclosure and responsibility for environmental hazards such as underground storage tanks, asbestos, or contaminated soil.

  • Shoreland Protection (NH RSA 483-B)

    For properties near lakes, rivers, or coastal areas, the agreement should address compliance with New Hampshire's Shoreland Water Quality Protection Act, which regulates development near public waters.

Frequently Asked Questions

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