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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 Vermont, 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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Vermont Requirements for Real Estate Purchase Agreement

  • Statute of Frauds (27 V.S.A. § 302)

    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 Transfer Tax Disclosure (32 V.S.A. § 9602)

    Disclosure of Vermont Property Transfer Tax obligations, which typically requires the seller to pay a tax based on the sale price unless otherwise negotiated.

  • Lead-Based Paint Disclosure (42 U.S.C. § 4852d)

    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.

  • Seller's Property Disclosure Statement (27 V.S.A. § 1311)

    Vermont law requires sellers to disclose known material defects about the property's condition that could affect its value or the buyer's decision to purchase.

  • Right of Rescission for Condominium Purchases (27A V.S.A. § 4-108)

    Buyers of condominiums have a right to rescind the purchase agreement within 15 days after receiving the public offering statement or resale certificate.

  • Water/Wastewater System Disclosure (27 V.S.A. § 1311)

    Sellers must disclose information about the property's water supply and wastewater disposal systems, including any known defects.

  • Act 250 Land Use Permit Disclosure (10 V.S.A. Chapter 151)

    Disclosure of any Act 250 land use permits that apply to the property, which regulate development and subdivision of land in Vermont.

  • Fair Housing Compliance (42 U.S.C. § 3601-3619 and 9 V.S.A. § 4503)

    The agreement must comply with federal and state fair housing laws, prohibiting discrimination based on protected characteristics such as race, color, religion, sex, disability, familial status, or national origin.

  • Escrow Requirements (26 V.S.A. § 2295)

    Provisions for handling earnest money deposits, including who will serve as escrow agent and conditions for release of funds.

  • Real Estate Commission Disclosure (26 V.S.A. § 2296)

    Disclosure of real estate commissions and agency relationships, including whether agents represent the buyer, seller, or both parties.

  • Title Insurance Requirements (8 V.S.A. Chapter 125)

    Provisions regarding title insurance, including who will pay for the policy and what exceptions to title may be acceptable to the buyer.

  • Residential Building Energy Standards (21 V.S.A. § 266)

    For newly constructed homes, disclosure of compliance with Vermont's Residential Building Energy Standards (RBES).

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

    If the seller is a foreign person, the buyer may be required to withhold a portion of the purchase price for federal tax purposes.

  • Tenant Rights in Property Sale (9 V.S.A. Chapter 137)

    If the property is tenant-occupied, the agreement must address tenant rights, including notice requirements and existing lease obligations that survive the sale.

  • Environmental Hazards Disclosure (10 V.S.A. Chapter 159)

    Disclosure of known environmental hazards such as underground storage tanks, hazardous waste, or contamination issues.

  • Flood Hazard Area Disclosure (10 V.S.A. § 754)

    Disclosure if the property is located in a FEMA-designated flood hazard area, which may affect insurance requirements and property use.

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

    Compliance with RESPA requirements regarding closing costs, loan disclosures, and prohibition of kickbacks or referral fees.

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

    For financed purchases, compliance with TILA requirements for disclosure of credit terms and consumer rights.

  • Home Warranty Provisions (9 V.S.A. § 2451a)

    Provisions regarding any home warranty being offered or required as part of the transaction, including coverage terms and duration.

  • Recording Requirements (27 V.S.A. § 341)

    Compliance with Vermont's requirements for recording deeds and other documents with the town clerk in the municipality where the property is located.

Frequently Asked Questions

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