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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 Ohio, 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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Ohio Requirements for Real Estate Purchase Agreement

  • Statute of Frauds (Ohio Revised Code § 1335.05)

    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 (Ohio Revised Code § 5302.30)

    Sellers must provide a residential property disclosure form to potential buyers disclosing known material defects that could affect the property's value.

  • 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 lead-based paint inspection.

  • Fair Housing Compliance (42 U.S.C. § 3601-3619; Ohio Revised Code § 4112.02(H))

    Real estate transactions must comply with federal and state fair housing laws prohibiting discrimination based on race, color, religion, sex, handicap, familial status, or national origin.

  • Real Estate Transfer Tax (Ohio Revised Code § 319.54)

    The agreement must address payment of the Ohio real estate transfer tax, which is typically $1 per $1,000 of the property's value.

  • Earnest Money Provisions (Ohio Revised Code § 4735.24)

    The agreement must specify terms for earnest money deposits, including amount, holder of funds, and conditions for return or forfeiture.

  • Title Examination and Insurance (Ohio Revised Code § 5301.25)

    Provisions for title examination, clearing title defects, and obtaining title insurance must be included to ensure marketable title transfer.

  • Closing and Possession Terms (Ohio Revised Code § 5302.01)

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

  • 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 of 15% of the sales price.

  • Homeowners Association Disclosures (Ohio Revised Code § 5312.02)

    Sellers must disclose information about homeowners associations, including fees, restrictions, and governing documents.

  • Financing Contingency (Ohio common law)

    If applicable, the agreement must include financing contingencies that protect the buyer if they cannot secure mortgage financing under specified terms.

  • Inspection Contingency (Ohio common law)

    The agreement should include provisions allowing the buyer to inspect the property and request repairs or terminate the contract based on inspection findings.

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

    The agreement must comply with RESPA requirements regarding closing costs, escrow accounts, and prohibition of kickbacks.

  • Truth in Lending Act (TILA) Compliance (15 U.S.C. § 1601 et seq.)

    For seller financing arrangements, the agreement must comply with TILA disclosure requirements regarding loan terms and costs.

  • Conveyance Requirements (Ohio Revised Code § 5302.05-5302.07)

    The agreement must specify the type of deed to be used for conveyance (typically warranty deed) and comply with Ohio's deed requirements.

  • Property Tax Proration (Ohio Revised Code § 323.11)

    The agreement must address how property taxes will be prorated between buyer and seller at closing.

  • Agency Disclosure (Ohio Revised Code § 4735.58)

    Real estate agents must provide written disclosure of their agency relationships to all parties in the transaction.

  • Mineral Rights Disclosure (Ohio Revised Code § 5301.56)

    If mineral rights are being reserved or transferred separately from the surface rights, this must be explicitly stated in the agreement.

  • Environmental Hazards Disclosure (Ohio Revised Code § 3750.01 et seq.)

    Sellers must disclose known environmental hazards such as underground storage tanks, asbestos, or contamination issues.

  • Dispute Resolution (Ohio Revised Code § 2711.01 et seq.)

    The agreement should include provisions for resolving disputes, such as mediation or arbitration clauses, that comply with Ohio law.

Frequently Asked Questions

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