Purchase Agreement

A purchase agreement is the contract between a home buyer and seller that sets the price, the closing date, and the conditions of the sale. It also states how much earnest money the buyer will deposit, when it is due, and who holds it.

Almost every question about earnest money is answered by this document. It says whether the buyer owes $5,000 or $15,000 on a $500,000 home, how many days they have to deliver it, and which contingencies let them cancel with a refund.

The agreement also covers what happens if someone backs out. Many forms let the seller keep the deposit as liquidated damages when the buyer defaults. Others leave room for other remedies. Read the deposit and default sections before you sign, because they control whether you can get your earnest money back if you back out.