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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 North Dakota, 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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North Dakota Requirements for Real Estate Purchase Agreement

  • Statute of Frauds (N.D.C.C. § 9-06-04)

    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 Requirements (N.D.C.C. § 47-10-02.1)

    Sellers must provide written disclosure of known material facts affecting the property value, including structural issues, environmental hazards, and other defects.

  • 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 lead-based paint inspections.

  • Legal Description Requirements (N.D.C.C. § 47-10-01)

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

  • Earnest Money Provisions (N.D.C.C. § 43-23-14.1)

    The agreement must specify the amount of earnest money deposit, who will hold it in escrow, and conditions for its return or forfeiture.

  • Financing Contingency (N.D.C.C. § 9-01-11)

    If the purchase depends on the buyer obtaining financing, the agreement must specify the terms, conditions, and timeframe for securing financing.

  • Title Examination and Insurance (N.D.C.C. § 26.1-20)

    The agreement must address requirements for title examination, who pays for title insurance, and remedies if title defects are discovered.

  • Closing and Possession Dates (N.D.C.C. § 47-10-01)

    The agreement must specify the closing date and when the buyer will take possession of the property.

  • Real Estate Transfer Tax Compliance (N.D.C.C. § 57-39.2)

    The agreement should address responsibility for payment of any applicable transfer taxes or documentary stamps.

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

    If the seller is a foreign person, the buyer must withhold 15% of the purchase price unless an exemption applies.

  • Homestead Exemption Acknowledgment (N.D.C.C. § 47-18-05)

    If the property is a homestead, both spouses must sign the agreement even if only one spouse holds title to the property.

  • Risk of Loss Provisions (N.D.C.C. § 9-12-18)

    The agreement must address who bears the risk of loss if the property is damaged between signing and closing.

  • Inspection Contingency (N.D.C.C. § 9-01-11)

    The agreement should specify the buyer's right to inspect the property, the timeframe for inspections, and remedies if defects are discovered.

  • Agency Disclosure (N.D.C.C. § 43-23-12.1)

    Real estate agents must provide written disclosure of whom they represent in the transaction.

  • Mineral Rights Provisions (N.D.C.C. § 47-10-24)

    The agreement must specify whether mineral rights are included in the sale, as they can be severed from surface rights in North Dakota.

  • Water Rights Provisions (N.D.C.C. § 61-04)

    The agreement should address the transfer of any water rights associated with the property.

  • Environmental Compliance (N.D.C.C. § 23-20.3; Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA))

    The agreement should address compliance with environmental laws and responsibility for any remediation required.

  • 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.

  • Liquidated Damages Clause (N.D.C.C. § 9-08-04)

    If included, liquidated damages provisions must be reasonable and not constitute a penalty under North Dakota law.

  • Attorney Review Provision (N.D.C.C. § 9-01-02)

    The agreement may include a provision allowing parties to have attorneys review the contract within a specified timeframe.

Frequently Asked Questions

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