What Is An Ohio Purchase Agreement?
An Ohio purchase agreement is a legally binding document that obligates a seller to deliver and a buyer to pay for real estate at an agreed-upon price. There are four key elements that make up a purchase agreement: parties, consideration, conveyance, and execution. The main purpose of this binding contract is to convey the ownership of property from the seller to the buyer. An Ohio purchase agreement can be either in the form of a land contract (where possession of the property passes to the buyer without delivery of a deed) or a deed with a valid reservation of the title in the vendor until the conditions of the contract have been fulfilled.
The agreement—once offered and accepted—becomes a contract enforceable in a court of law . Essentially, a purchase agreement is a way to assure both parties that neither will back out of the real estate deal. Should the buyer fail to purchase the property or the seller choose to go back on the deal and avoid their obligations, the other party may sue for specific performance and may also ask the court to grant a rescission of the contract, which would allow the contract to be terminated.
Ohio property purchase agreements usually feature the following items: details of the contract (date, names of parties, description of property), agreed-upon purchase price (including money down, balance and date for balance to be paid), other specific conditions of the sale, and signatures of parties.
Basic Components Of Ohio Purchase Agreements
The key elements of an Ohio purchase agreement are essential in identifying the exact agreement of the parties and insuring that nothing has been omitted. An Ohio real estate purchase agreement must include a description of the property being purchased, the purchase price, the closing date, and any contingencies or special conditions. If your purchase agreement fails to include a closing date, it likely is voidable at some point even though the parties have conducted a closing and the real estate has been transferred. Similarly, if there is no meeting of the minds as to the property description, the purchase agreement is voidable, or at least you will very likely have a legal argument with the seller as to the intended property. It is important to understand that on agricultural or property on which a house is located that has not been divided (i.e., a parcel that contains 50 acres of land and a house that has not been subdivided or described in a separate deed), it is very common for the legal description to be entirely wrong. In that situation the NESA (the location of the physical address) becomes the controlling factor as to the property to be transferred.
The other two exact issues that need to be clear are the purchase price (including how the down payment will be allocated to the major components of the real estate transaction and whether or not the buyer is paying any of the seller’s closing costs) and the contingencies. It may be the buyer’s responsibility to complete taxes, insurance, legal fees, or survey if the buyer is to bring the property subject only to a mortgage, with no warranties or obligations other than to make a mortgage payment when due. Those seem to be the common areas that often cause problems in performance. If you are buying a farm, your offer likely will put the burden of the survey on the seller to the extent it is necessary to divide up the property under construction; however, if you are buying a 1.5 – 2.5 acre building lot to build your dream home, you are likely paying for the lot, the survey, and associated fees. Your Realtor will be a big help in negotiating these items.
With the current building boom in our area, many of us are seeing these agreements come into play with the joint venture type deals where the buyer is in the position to cash flow the deal by financing, but is joint venturing with the seller to develop the property in an "all-in" style. In that situation, the buyer and seller have to agree on the split of the profits, as well as the method of sharing the mortgage and other expenses, and dividing the property in the end. It is not common to see a real estate purchase agreement used when drafting up the interest of the buyer. Rather, most of my clients are using an operating agreement or a partnership agreement. Clearly, the parties have more rights and obligations under the operating agreement or partnership agreement than they do with the real estate purchase agreement, but as these deals are becoming more and more common, we are seeing more and more partial performance of the terms of the formal agreement to proceed with the details. With those deals, unlike a standard real estate transaction, the purchase agreement can be the last item of the deal, if needed, when the parties are ready to formally convey the property to the buyer.
Legal Rules In Ohio
Many states, including Ohio, have specific requirements for contracts to be valid. Purchase agreements in Ohio must adhere to both general contract requirements as well as requirements specific to these types of contracts.
Like most states, Ohio requires that a purchase agreement consist of the following:
For the most part, Ohio is similar to NY with regard to the basic requirements for a contract. However, in order to be as clear and effective as possible, it is beneficial to clarify some points.
Ohio requires that a written purchase agreement be signed by the buyer, seller, or his agent. The only exception is in the case of an oral contract between a landlord and tenant regarding renewal of a lease agreement; in that circumstance, the agreement must be in writing. While it is not specifically required under Ohio law, it is helpful for all parties involved to review and sign the purchase agreement, especially if there are any substantial changes made to it before it is accepted.
Ohio requires sale contracts for real property to include the following mandatory disclosures:
Ohio also requires certain clauses to be included in a purchase agreement:
Ohio allows for a closing agent to be selected by the buyer and seller. This closing agent must be one of the following:
Any of the above entities can represent a client in a contract dispute. However, only attorneys have the ability to represent a client in court.
Ohio Purchase Agreements: Mistakes To Avoid
The purchase agreement is the most important document in any real estate transaction. Not only is it the foundation for the deal, but it also protects both you and your interests during the buying process. For this reason, it’s crucial that you avoid common mistakes when it comes to either drafting or executing the purchase agreement itself.
One of the biggest mistakes that people make when it comes to Ohio purchase agreements is failing to fully understand all of the terms involved. Remember, even though this is a legally binding contract, the fact remains that it is meant to be a negotiation tool. This means that you still have the ability to strike out terms that you’re not comfortable with or to change language to what you feel is more appropriate. Even if you’re unfamiliar with the wording, you have the right to ask your real estate agent to explain it to you and for them to change it into more understandable language in the drafts and the final copy.
A common mistake when it comes to Ohio purchase agreements is to think of them as a rigid changes are not permissible document that cannot be changed. However, this is simply not the case. Understand that the purchase agreement is primarily a negotiation tool. Although the real estate agent will do all of the hard work for you, like proposing agreements and compromises, you are in control at the end of the day of what goes into your final copy. Use this to your advantage and negotiate your terms until you feel comfortable with them before signing.
Another common mistake that people make with Ohio purchase agreements is a failure to address home maintenance situations. Many people believe that they can just skip over this section because they don’t think that they will need it. This is a major mistake. With thousands of dollars on the line in renovation and repairs, you cannot afford to simply ignore the fact that the subject property may require maintenance. Make sure to leave a place for this in the final copy of your agreement so that you can protect yourself down the line.
Another mistake regarding Ohio purchase agreements is the belief that all of the terms are indestructible. This is not true – in fact, many people simply sign blindly without considering the implications that this purchase could have on their financial situation. Take a moment to look carefully at the financing arrangements in the Ohio purchase agreement and consider the various implications that they could have. For example, you may need to provide mortgage insurance for the property. You also need to consider your closing costs, costs of repairs that you will need to pay upfront, closing, and ongoing costs of inspections and maintenance. All of these could make your dream house into a nightmare.
Negotiating A Purchase Agreement
The final price of a sale will often be the biggest factor on our minds during negotiations, but any purchaser of real estate should consider other terms as strongly as he/she does the purchase price. Your purchase price will be paid in installments over time (i.e., down payment, mortgage payments, closing costs, etc.) and will slowly become less important as you use your new real estate, so the terms of that usage are paramount to your long term financial well-being. That is why negotiating seller’s financing terms, usually the longest term of a win-win arrangement, is often your best option.
Another factor in any Ohio real estate purchase that is often subject to negotiation is how you and the seller will split the cost of any relevant taxes or other fees that will apply at the time of closing . It is not uncommon for a closing to take place in the middle of a calendar year, so the county or municipal tax bills could be due anytime from a few weeks to a few months after the purchase is successfully completed. As the purchaser of the real estate you have the most stake in when those taxes must be paid, and any negotiation regarding timing or division of payment is likely to favor you.
Other important negotiation points include insurance costs and inspections. Often a property will need to be insured at the time of the transaction in order to obtain financing or simply to protect your investment. Likewise, the purchase may be contingent upon the satisfactory completion of any needed inspections (including retrofitting) before the sale can conclude. In negotiating your purchase agreement, you will want to limit the inspection contingencies to only those parts of the property that are in question and will not be fixed through other means before closing.
The Role Of Real Estate Agents
Ohio purchase agreements are the normal way that most purchases of real estate are documented in this state. For many people and most real estate agents, however, what a purchase agreement actually entails and what the responsibilities of the parties are sometimes seem a little bit mysterious. This overview describes how Ohio purchase agreements are drafted, what they usually say, and what their legal effect is.
Real estate agents most frequently write purchase agreements for the sale of real estate. In Ohio, and in other states, licensed real estate agents are permitted to draw real estate documents such as Ohio purchase agreements so long as the agreements they draft do not get too complicated. Real estate agents must use the forms that are approved by the various real estate trade associations in Ohio. Again, these are not fancy forms. They are actually drafts of Ohio purchase agreements that are very simple, but require each party to fill in the details, such as how much money is being paid and when.
The actual agreement is usually typed in by typing the particulars of the sale (money to be paid, when and how money will be paid, and when closing will occur). The purchase agreement is usually signed by the seller and the buyer. Then the real estate agent takes the purchase agreement to the title company or the attorney that will be closing the sale, and that company or attorney does the rest. They must have a copy of the sale agreement which describes the property and has all of the details of the purchase spelled out in it. Then everyone involved can analyze the terms of the deal, and if it is appropriate, finalize the sale and transfer of the property.
To give our clients an understanding of the real estate happenings in Ohio, our real estate attorneys have put together a one-page overview with the basic information — download the document here.
FAQs On Ohio Purchase Agreements
Buyers and sellers of real estate often have questions regarding purchase agreements. Here are some of the most common ones.
How long does a purchase agreement last? Under Ohio law, a contract remains in effect until it is discharged and resulting obligations fully performed by the parties. In practical terms, this usually occurs upon satisfaction of all closing conditions, delivery of the deed to the buyer, and payment by the buyer of the purchase price.
What can a seller do if a buyer breaches the purchase agreement? A seller has several options if a buyer fails to comply with an agreement to purchase real estate. The seller’s choices may be limited by the specific facts of the situation or by the language of the purchase agreement itself. A seller may (a) sue for money damages, (b) enter the property and screen the property for potential other buyers (see "Show, Show, Show the Property," above), (c) cancel the purchase agreement, (d) require performance under the purchase agreement, or (e) terminate a leasehold.
What can a buyer do if a seller breaches the purchase agreement? Like a seller, a buyer has several options if a seller fails to comply with an agreement to sell real estate. A buyer has (a) a claim for money damages for breach of contract, which may not require a closing (cancellation of the closing having resulted from the seller’s breach, for example); (b) the right to require the performance of the seller under the purchase agreement; (c) the right to rescind a real estate contract; (d) an action to prevent the seller from making an assignation (selling) in avoidance of the agreement; and (e) a claim for specific performance, which is an order by a court requiring the seller to deliver the deed to the buyer.
Final Thoughts And Other Resources
In conclusion, the Ohio purchase agreement is a vital document in the home buying and selling process in Ohio. It protects both the buyer and seller and helps ensure that the sale process goes as smoothly as possible. As with any contract, it’s essential to read the document carefully, understand its provisions, and make sure you’re comfortable with all the terms before signing.
If you’re looking for more detailed information on this topic , consider exploring the Ohio Revised Code Sections 5313.02 (mandatory provisions in real property purchase contracts), 5302.30 (requirements for valid deeds), or the Ohio Real Estate Commission’s published rules and regulations.
Thanks for reading this article! We hope you found the information about Ohio purchase agreements useful. If you have any questions, feel free to reach out.
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