What You Should Know About Real Estate Purchase Contracts in San Jose

What You Need To Know About Real Estate Purchase Contracts


When it comes to purchasing property in San Jose, one of the most crucial documents you’ll encounter is the real estate purchase contract. Also known as a purchase and sale agreement, this contract outlines the agreement between the buyer and seller and sets the stage for the transaction’s closing. This article will provide a comprehensive guide to understanding real estate purchase contracts in San Jose, including their contents, contingencies, and essential tips for getting the contract right.

Understanding Real Estate Purchase Contracts

A real estate purchase contract is a legally binding document that establishes the responsibilities of all parties involved in the transaction. As mandated by the United States Statute of Frauds, this contract must be signed by both the buyer and seller to be enforceable. Essentially, it serves as a bilateral agreement with the legal capacity to buy, exchange, or transfer real property. The contract is based on a legal consideration, typically money, which serves as the medium of exchange for the property being purchased. However, consideration can also take the form of a promise to pay or a property exchange.

Key Elements of a Real Estate Purchase Contract

To ensure a comprehensive and clear agreement, a real estate purchase contract should include the following key elements:

1. Identification of Parties and Property Details

The contract should clearly identify the buyer and seller, along with their contact information. Additionally, it should provide the exact address of the property and a clear legal description to avoid any confusion or disputes.

2. Purchase Price and Terms

The agreed-upon purchase price and the corresponding terms should be explicitly stated in the contract. This includes any contingencies, financing details, and payment deadlines.

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3. Deposit Amount

The contract should specify the amount of the deposit, also known as earnest money, that the buyer must provide as a show of good faith. This deposit is typically held in an escrow account until the closing of the transaction.

4. Rights and Obligations

The contract should outline the rights and obligations of both the buyer and seller. This includes responsibilities regarding property inspections, repairs, and any other specific conditions agreed upon by the parties.

5. Real Estate Taxes and Special Assessments

The contract should address the allocation of real estate taxes and any special assessments associated with the property. This ensures that both parties are aware of their financial responsibilities.

6. Property Condition and Inclusions

The contract should clearly state the condition of the property, including what is included in the sale and what is not. This may cover fixtures, appliances, or any other items that will be transferred with the property.

7. Closing Date and Costs

The contract should specify the agreed-upon closing date, which is when the ownership of the property is transferred from the seller to the buyer. It should also outline the costs associated with the closing process, such as title insurance, appraisal fees, and attorney fees.

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8. Terms of Possession

The contract should address the terms of possession, clarifying when the buyer will officially take possession of the property. This may include a specific date or a contingency based on the completion of certain conditions.

9. Contingencies

Contingencies are crucial elements in a real estate purchase contract as they address potential operational problems and protect both parties. Common contingencies include mortgage approval, property appraisal, and professional inspections. These contingencies provide a way for the buyer to back out of the contract if certain conditions are not met.

10. Termination Clause

In the event that one party fails to fulfill their obligations or breaches the contract, a termination clause should be included. This clause outlines the conditions under which the contract can be terminated and the consequences of termination.

The Importance of Contingencies in Real Estate Purchase Contracts

Contingencies play a vital role in protecting both buyers and sellers during a real estate transaction. They allow for the possibility of unforeseen circumstances and give the parties a way out if certain conditions are not met. Let’s take a closer look at some common contingencies and what should be listed in each clause:

Mortgage Contingency

A mortgage contingency protects the buyer by ensuring that the transaction will only be finalized if their mortgage is approved on the same terms and numbers as stated in the contract. If the buyer’s mortgage is not approved, this contingency allows them to back out of the contract without any penalties.

Appraisal Contingency

An appraisal contingency is often required by mortgage companies. It states that the sale is contingent upon the property being appraised for at least the amount of the selling price. If the property appraises for less than the agreed-upon price, the buyer can renegotiate or terminate the contract.

Professional Inspection Contingency

A professional inspection contingency allows the buyer to hire a qualified inspector to assess the condition of the property. If significant issues are discovered during the inspection, the buyer can negotiate repairs with the seller or terminate the contract if the seller refuses to address the problems.

It’s important to note that these contingencies are not exhaustive and can be tailored to meet the specific needs of the buyer and seller. It’s crucial to consult with a real estate professional to ensure that all necessary contingencies are included in the contract.

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Tips for Getting the Purchase Contract Right in San Jose

When drafting or reviewing a real estate purchase contract in San Jose, consider the following tips to ensure its accuracy and effectiveness:

1. Understand the Terminology and Adapt Language Accordingly

Real estate contracts can vary in their standard language and terminology, and it’s essential to familiarize yourself with the specific terms used in San Jose. Take the time to review the agreement, check for any changes, and adapt the language and terms as needed to align with local regulations and customs.

2. Seek Professional Assistance

Whether you are a first-time buyer or an experienced investor, it’s always advisable to seek professional assistance when dealing with real estate purchase contracts. Working with a real estate attorney or a knowledgeable real estate agent can provide valuable guidance throughout the process. They can help you navigate the complexities of the contract, identify potential pitfalls, and ensure that your rights are protected.


Understanding real estate purchase contracts is vital for anyone involved in buying or selling property in San Jose. These contracts serve as the foundation for successful transactions and outline the rights and obligations of all parties involved. By familiarizing yourself with the key elements of a real estate purchase contract and including relevant contingencies, you can protect your interests and ensure a smooth and successful transaction. Remember to seek professional assistance and adapt the contract to align with local regulations and practices. With these tips in mind, you’ll be well-equipped to navigate the real estate market in San Jose.

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Seb Frey helps long-time Bay Area homeowners make their next move easily the next one yet. If you're looking for a minimum of hassle, maximum net cash on sale, and certain results, contact Seb today.