he Beginner’s Guide to the Most Important FSBO Paperwork
If you’re selling your home For Sale By Owner (FSBO), one document will matter more than almost any other: the purchase agreement. It’s the core legal contract that spells out every detail of the sale — from the purchase price and closing date to contingencies, inspections, and responsibilities for both you and the buyer.
Whether you’re selling your first home or you’ve been through a transaction before, understanding this document is critical. A clear, well-drafted purchase agreement protects your interests, prevents misunderstandings, and ensures the deal moves smoothly from offer to closing.
This guide will walk you step by step through what a purchase agreement is, what it must include, how addendums work, and how to avoid common mistakes — all in plain, beginner-friendly language.
🧾 1. What Is a Purchase Agreement?
A purchase agreement (also called a sales contract or real estate purchase contract) is a legally binding document that outlines the terms and conditions of the property sale. It’s signed by both the buyer and seller after an offer is accepted — and once signed, it becomes the “roadmap” for the rest of the transaction.
In other words, it’s the contract that answers every question about the deal:
- Who is buying and selling the property?
- What is the final purchase price?
- When will the sale close?
- What happens if the inspection reveals issues?
- Who pays for certain costs?
💡 Pro Tip: Never rely on a verbal agreement or email exchange to finalize a home sale. Real estate transactions must be in writing to be legally enforceable.
📝 2. The Most Important Sections of a Purchase Agreement
While every state’s version of a purchase agreement looks a little different, they all include the same basic elements. Here’s what each section means and why it matters:
1. Property Details
This section identifies the home being sold, including its address, legal description (from the deed or title), and any fixtures or items that are included or excluded from the sale.
✅ Example:
- Included: built-in appliances, ceiling fans, window treatments.
- Excluded: seller’s washer/dryer, garage shelving.
2. Purchase Price and Earnest Money Deposit
This part states the agreed purchase price and the amount of earnest money — a good faith deposit the buyer pays to show they’re serious about the purchase.
- Earnest money is usually 1%–3% of the sale price.
- It’s typically held in escrow and credited to the buyer at closing.
💡 Pro Tip: The purchase agreement should clearly explain what happens to earnest money if the deal falls through — for example, whether the buyer gets it back if they cancel within a contingency period.
3. Financing and Payment Terms
This section explains how the buyer will pay for the property — whether through a mortgage, cash, or alternative financing such as seller financing. It will also include:
- Loan type (conventional, FHA, VA, etc.)
- Amount of down payment
- Contingencies for mortgage approval
If the buyer can’t secure financing by the deadline, they may have the right to cancel the contract without penalty (if a financing contingency is included).
4. Contingencies
A contingency is a condition that must be met for the sale to move forward. These clauses protect both parties by allowing them to cancel or renegotiate under certain circumstances.
The most common contingencies are:
- Inspection Contingency: Allows the buyer to inspect the property and request repairs or walk away if major issues are found.
- Financing Contingency: Cancels the contract if the buyer’s loan is denied.
- Appraisal Contingency: Lets the buyer back out if the property appraises for less than the purchase price.
- Sale-of-Home Contingency: Ties the purchase to the buyer selling their current home first.
💡 Pro Tip: Contingencies are negotiable. As the seller, you can accept them as-is, counter with modifications, or reject them altogether.
5. Closing Date and Possession
This section outlines the timeline for closing — typically 30 to 45 days from contract signing — and states when the buyer will take possession of the property. (Usually, it’s at closing, but sometimes sellers request a “post-closing occupancy” period if they need more time to move.)
6. Prorations and Closing Costs
Here, the agreement states how expenses like property taxes, utilities, or HOA dues will be prorated between buyer and seller. It will also specify who pays which closing costs — something that’s often negotiated as part of the offer.
7. Disclosures and Warranties
Most states require sellers to provide certain disclosures about the property’s condition (such as lead paint or known defects). The purchase agreement usually references these disclosures and confirms that the buyer has received and reviewed them.
8. Default and Remedies
This section explains what happens if either party fails to meet their obligations. For example, if a buyer defaults, the seller might keep the earnest money. If a seller defaults, the buyer may have the right to sue for damages or cancel the contract.
📑 3. What Are Addendums — and Why Do They Matter?
An addendum is a document that modifies, clarifies, or adds new terms to the original purchase agreement. It’s legally binding once both parties sign it, just like the main contract.
You might use addendums for:
- Inspection results (e.g., agreeing on specific repairs or price reductions)
- Adding or removing contingencies
- Changing the closing date
- Addressing appraisal shortfalls
- Negotiating repairs or credits after the initial contract is signed
💡 Example: After a home inspection, the buyer requests a new water heater. You agree to provide a $1,000 credit at closing. Instead of rewriting the entire contract, you add this condition with an inspection addendum.
Important: Any agreement made verbally or over email should still be documented in an addendum. If it’s not in writing and signed, it’s not enforceable.
🛑 4. Common Mistakes FSBO Sellers Make With Purchase Agreements
Because FSBO sellers are handling the paperwork themselves, there are a few common pitfalls you’ll want to avoid:
- Using generic online templates without legal review.
Templates are a good starting point, but they may not comply with state laws or include required clauses. - Failing to define deadlines clearly.
Ambiguity around inspection, financing, or closing dates can lead to disputes or even contract cancellations. - Not addressing contingencies properly.
Overlooking or misinterpreting contingency clauses can leave you vulnerable if the buyer backs out. - Making verbal agreements.
If it’s not in writing and signed, it doesn’t exist — even if both parties “remember” agreeing to it. - Forgetting addendums.
Any negotiated changes must be documented. Otherwise, they may not hold up legally.
💡 Pro Tip: Consider having a real estate attorney review the final agreement before signing. The cost is minimal compared to the potential expense of a legal dispute later.
🏁 5. Tips for a Smooth Contract Process
Selling your home FSBO means you’re in charge of the transaction — but that also gives you the power to make it smooth and successful. Here’s how:
- Review the contract carefully. Don’t rush. Take time to read every clause.
- Ask questions. If anything is unclear, consult an attorney or title company.
- Keep communication open. Respond promptly to buyer requests or questions.
- Stay organized. Keep copies of every signed agreement, addendum, and disclosure.
- Use professionals when needed. Even without an agent, you can (and should) rely on real estate attorneys, title companies, or escrow agents for guidance.
📌 Final Thoughts: The Purchase Agreement Is Your Roadmap
Think of the purchase agreement as the instruction manual for your home sale. It tells everyone involved exactly what to do, when to do it, and what happens if something goes wrong. Understanding it — even at a basic level — puts you in control of your FSBO transaction and gives you confidence every step of the way.
Addendums are simply tools to adapt the agreement as circumstances change. Together, these documents ensure your sale is clear, fair, and legally binding.
With the right knowledge and a careful eye for detail, you can handle this part of the FSBO process just like a seasoned real estate professional — and close the deal with peace of mind.