The purchase agreement, explained: the FSBO sale contract

An accepted offer is a handshake. The purchase agreement is the sale. It is the written, signed contract that takes “we agreed on a price” and turns it into a deal a court would enforce, a document that names the parties, fixes the price, sets the deposit, lists every condition the deal must clear, and spells out what happens if someone walks away. For a for-sale-by-owner seller, this is the single most important piece of paper in the whole process, and the one most worth understanding before you sign.

This guide does two things. First, it reads a standard residential purchase agreement clause by clause in plain English, so you know what each section does and where the risk sits. Second, it tells you where to get the contract, because the safest answer is almost never a random fill-in-the-blank template off the open web.

This is general information, not legal advice. Real estate contract law is set state by state, terms and deadlines vary, and the only person who can tell you what a clause means for your specific sale is a licensed real estate attorney in your state. Treat what follows as a map, then confirm the details locally.

First, where the contract should come from

Vendors sell “for sale by owner contract” templates because the search demand is huge. A generic template is better than nothing, but it is the weakest of the real options. Three sources are better, and you should reach for them in roughly this order.

Your state real estate commission’s standard form. Most states have a real estate commission or division that publishes a standard residential purchase contract, often called a Residential Purchase Agreement or a Contract to Buy and Sell Real Estate. Texas, for example, requires its licensees to use the Texas Real Estate Commission’s promulgated One to Four Family Residential Contract, and Colorado publishes the Contract to Buy and Sell Real Estate that its Division of Real Estate keeps current. These forms are written by the state, updated as state law changes, and tested in real disputes. Some are freely available; some are intended for licensee use, in which case an attorney or title company can supply the right one.

A real estate attorney. In several states an attorney is effectively required to handle parts of a residential closing, and in many more the contract is routinely drawn up or reviewed by counsel. Even where it is optional, a flat-fee contract review is small next to the price of the home. Our guide on whether you need a lawyer to sell your house walks through where a lawyer is required, where it is merely smart, and what a review costs.

Your title or settlement company. In much of the country the title company or a settlement agent prepares or reviews the paperwork as a normal part of the transaction. They handle these contracts every day in your county, and they have a direct interest in getting the title and closing mechanics right.

We deliberately do not host or offer our own fillable contract. A contract that is wrong for your state is worse than no contract, and only a local professional can be sure it is right. What we can do is make sure you understand what you are reading.

How to read this section

A purchase agreement has two kinds of clauses. Terms are agreed facts, like the price or the closing date. Contingencies are conditions that must be met or the deal can be canceled, usually with the deposit returned. The contingencies are the exits, so read those most carefully. Each one is a way the deal can fall apart, and the wording decides who keeps the money when it does.

Below is the anatomy of a standard residential contract, clause by clause.

1. The parties

The contract opens by naming the buyer and the seller, exactly as each will take or give title. This sounds trivial and is not. The seller’s name must match how the property is currently titled, including every owner if the home is held jointly, by a married couple, in a trust, or by an estate. If your spouse is on the deed, your spouse signs. If the home is in a trust, the trustee signs in that capacity. A mismatch here can stall or void the sale at closing, when the title company checks who actually has the right to sell.

2. The property: address and legal description

The contract identifies the home two ways: the street address everyone knows it by, and the legal description, the formal description used in the public land records (a lot and block, a metes-and-bounds description, or a recorded parcel number). The legal description, not the street address, is what actually conveys the land. Copy it exactly from your current deed or the title commitment. A wrong or incomplete legal description is one of the few errors that can unravel a closing entirely.

3. Purchase price and how it is paid

The price clause states the total purchase price and breaks down how the buyer will fund it: the earnest money deposit, any additional down payment, and the loan amount. If the buyer is paying cash, the contract should say so and call for proof of funds. If the buyer is financing, the price clause connects to the financing contingency below. Be precise. The number here is the number that flows through to your bottom line, which you can model in our net proceeds calculator.

4. Earnest money deposit

Earnest money is the deposit the buyer puts down to show they are serious. The Consumer Financial Protection Bureau describes it as a deposit a buyer pays to show good faith on a signed contract, held by a third party such as a title company. The contract states the amount, who holds it (usually an escrow or title company, not the seller directly), and when it must be delivered, often within a few days of signing.

What happens to it later is set by the contingency clauses:

• If the sale closes, the earnest money is usually applied to the buyer’s closing costs or down payment.
• If the buyer terminates for a reason the contract allows, such as a failed inspection or a financing contingency that is not met, it is generally returned to the buyer.
• If the buyer walks with no contractual right to, the seller may be able to keep the deposit as compensation.

That last line is the whole point of the deposit from a seller’s view: it gives the buyer something to lose. A larger deposit signals a more committed buyer. Hold it in neutral escrow, never in your own account.

5. Financing and contingencies

This is the heart of the contract for most sales, and the part a FSBO seller should read twice.

The financing contingency lets a buyer who is borrowing cancel and recover the deposit if they cannot get the loan described in the contract, despite a good-faith effort, by a stated deadline. As a seller, you want this contingency tight: a short deadline, a clear loan type and amount, and a requirement that the buyer apply promptly. A vague or open-ended financing contingency lets a buyer tie up your home for weeks and then leave with the deposit. This is exactly why a real pre-approval letter matters before you accept an offer. See offers and negotiation for how to vet a buyer’s financing up front.

The inspection contingency gives the buyer a window, often one to two weeks, to inspect the home and either accept it, ask you to repair or credit items, or cancel. Expect a negotiation after the inspection. Your leverage depends on the market and on how the clause is written: some let the buyer walk for any reason found, others only for material defects. This is also where your disclosures matter, because a buyer who already knew about a problem from your seller disclosures has less room to reopen the price over it.

The appraisal contingency applies when the buyer is borrowing. The lender orders an appraisal to confirm the home is worth at least the price, because the lender will not lend more than the property supports. If the appraisal comes in low, this contingency lets the buyer renegotiate, pay the gap in cash, or cancel and recover the deposit. A low appraisal is one of the most common reasons a deal stalls, which is why pricing to the comparable sales, covered in price your home, protects you here.

Read every contingency as a question: under exactly what conditions can the buyer leave, and who keeps the deposit when they do?

6. Title and survey

The contract sets out how clear title will be delivered and who pays for the owner’s title insurance policy. Title insurance protects the buyer’s ownership against defects that predate the sale, such as an old lien, a forged document, or an undisclosed heir. The American Land Title Association describes an owner’s policy as a one-time fee paid at closing that protects the owner’s property rights for as long as they or their heirs own the home. Who pays the premium varies by state and by local custom and is itself negotiable.

The title company runs a search and issues a commitment listing anything attached to the property. The contract usually gives the buyer a period to object to title problems and requires you to clear them, paying off your existing mortgage and any liens, before closing. Many contracts also address a survey: whether an existing survey will be provided or a new one ordered, and who pays. A survey confirms the boundaries and flags encroachments or easements.

7. Seller disclosures

The contract ties to the disclosures you are legally required to make. Most states require a written property condition disclosure, and federal law requires a separate lead-based paint disclosure for homes built before 1978. The contract typically confirms these were delivered and gives the buyer a defined period to review them. Do not treat disclosure as a formality. Honest, complete disclosure is your strongest protection against a lawsuit after closing, and it is far cheaper than the alternative. Our seller disclosures and documents guide covers what you must reveal and how.

8. Fixtures versus personal property

Disputes here are common and entirely avoidable. The default rule is that fixtures, items attached to the home such as built-in appliances, light fixtures, ceiling fans, and window treatments, stay with the house, while personal property, items not attached, leaves with the seller. The problem is that the line is genuinely fuzzy. Is a mounted television a fixture? The wall bracket usually is; the television usually is not. Is the chandelier you inherited included? By default, probably yes.

Good contracts solve this by listing the included and excluded items by name. If you are taking the dining-room chandelier, the washer and dryer, or the patio heater, write it into the contract as excluded before you sign. Sorting this on paper now prevents an ugly argument at the final walkthrough, when the buyer notices the fixtures they assumed were theirs are gone.

9. Closing date and possession

The contract sets the closing date, the day title transfers and the money changes hands, and the possession date, the day the buyer actually gets the keys. These are usually the same, but not always. If you need a few days after closing to move out, that has to be written in, often as a short rent-back. Do not rely on a friendly verbal understanding.

Build a realistic timeline. If the buyer is financing, the lender must by federal rule deliver the buyer a Closing Disclosure at least three business days before closing, and any major change can reset that clock and push the date. Lender underwriting, the appraisal, and title clearance all take time. Walk through the full sequence and the costs in closing and costs.

10. Default and remedies

This clause answers the uncomfortable question: what happens if someone breaks the contract? It typically sets out the consequences if the buyer defaults, often that the seller may keep the earnest money, and the consequences if the seller defaults, which can include the buyer recovering the deposit or, in some contracts, seeking to force the sale through (specific performance). The exact remedies, and any cap on them, vary by state and by the form you use. This is one of the clauses most worth having a local attorney explain, because it decides what your downside actually is.

11. Signatures, dates, and addenda

Finally, the contract is signed and dated by every party. It becomes binding when both sides have signed the identical agreement and that acceptance is communicated, after which the deposit is delivered to escrow. A few mechanics to keep straight:

• A counteroffer is a new offer. Any change to the terms resets the negotiation until both parties sign the same final version. Track which version is the live one.
• Initials matter. Many forms require initials on key pages and on any handwritten change. Missing initials create ambiguity later.
• Addenda are part of the contract. Financing addenda, lead-paint disclosures, HOA documents, and rent-back agreements ride along with the main form. Make sure every one referenced is actually attached and signed.

A short checklist before you sign

• The seller names match the deed exactly, and every owner will sign.
• The legal description is copied exactly from the deed or title commitment.
• The price, deposit amount, and deposit holder are correct and the money goes to neutral escrow.
• Every contingency has a clear deadline and you understand who keeps the deposit if the buyer exits under it.
• Included and excluded fixtures are listed by name.
• The closing date and possession date are realistic and any rent-back is in writing.
• A local professional, your state’s standard form, a real estate attorney, or your title or settlement company, supplied or reviewed the contract.

The purchase agreement is where a FSBO sale is won or lost on paper. You do not need to draft it from scratch, and you should not pull it off a random template site. Start from your state’s standard form or a real estate attorney, understand each clause using this guide, and get a professional review before you sign. For the buyer’s side of the same document, see make an offer without an agent. To see how the savings from selling yourself stack up against a review fee, try the commission savings calculator.

Sources used on this page

Every legal, tax, and process claim on this page traces to one of these. We re-check them on a schedule and date the page when anything changes.

1. Mortgages key terms (earnest money: a deposit to show good faith, held by a third party such as a title company)Consumer Financial Protection Bureau · consumerfinance.gov
2. What is an escrow or impound account?Consumer Financial Protection Bureau · consumerfinance.gov
3. Closing Disclosure explainer (lender must provide it three business days before closing)Consumer Financial Protection Bureau · consumerfinance.gov
4. One to Four Family Residential Contract (Resale), standard promulgated form TREC No. 20-18Texas Real Estate Commission · trec.texas.gov
5. Real Estate Broker Contracts and Forms (state Contract to Buy and Sell Real Estate)Colorado Division of Real Estate · dre.colorado.gov
6. Title Insurance Protects Property Rights (owner's policy, one-time fee at closing)American Land Title Association · alta.org

Common questions

What is a residential purchase agreement?

It is the written, signed contract that turns an accepted offer into a binding sale. It names the buyer and seller, gives the legal description and address, sets the price and the earnest money deposit, lists the conditions the deal must clear (financing, inspection, appraisal, clear title), and fixes the closing date and what happens if either side walks. Until it is signed by both parties, you have a negotiation, not a sale.

Where should a for-sale-by-owner seller get the contract?

Use a standard form, not a random web template. Most state real estate commissions publish a standard residential contract, and in many states a real estate attorney, the title company, or a settlement agent prepares or reviews the contract as a normal part of the deal. These forms are kept current with state law and have been tested in court. A generic template off the open web may miss a disclosure your state requires or use language a local court reads differently.

What is earnest money and is it refundable?

Earnest money is a deposit the buyer pays to show good faith on the signed contract. The CFPB describes it as held by a third party such as a title company. If the sale closes, it is usually applied to the buyer's closing costs or down payment. If the buyer terminates for a reason the contract allows, such as a failed inspection or financing contingency, it is generally returned. If the buyer simply walks without a contractual right to, the seller may be able to keep it. The exact rules live in the contingency clauses, which is why those clauses matter so much.

What is the difference between a contingency and a regular term?

A contingency is a condition that must be satisfied or the deal can be canceled, usually with the deposit returned. The common ones are financing, inspection, appraisal, and clear title. A regular term, like the price or the closing date, is just an agreed fact. Contingencies are the exits, so read them slowly. Each one is a way the buyer can leave and, depending on the wording, get the deposit back.

What stays with the house, fixtures or personal property?

The general rule is that fixtures, things attached to the home such as built-in appliances, light fixtures, and window treatments, stay with the house, while personal property, things not attached, goes with the seller. The trouble is the line is fuzzy, so good contracts list the included and excluded items by name. If you are taking the dining-room chandelier or the washer and dryer, say so in writing before you sign, not at the walkthrough.

Do I need a lawyer to sign a purchase agreement?

It depends on your state. Several states effectively require an attorney to handle parts of a residential closing, and in many others an attorney or the title or settlement company routinely prepares or reviews the contract. Even where it is optional, a flat-fee contract review by a real estate attorney is modest next to the price of the home and the commission you are already saving by selling yourself. See our guide on whether you need a lawyer to sell.

When does the contract become binding?

When both the buyer and seller have signed the same agreement and that acceptance has been communicated to the other side, usually with the deposit then delivered to escrow within a few days. Before that, an offer can be withdrawn or countered. A counteroffer is a new offer, so each change resets the negotiation until both parties sign the identical final version.