Purchase Contract: A Step By Step Guide for Buyers and Sellers in Kauai

Purchase Contract: A Step By Step Guide for Buyers and Sellers in Kauai

The purchase contract is an essential part of a real estate transaction because it lays out all the pertinent details such as price and terms. In fact, in a well drawn-up purchase contract, every element of the transaction is addressed, from earnest money requirements to well disclosures. The purpose of such a contract is to make sure that all terms and expectations are clearly delineated and to protect both the buyer and the seller. And that’s also why most contracts are, for the uninitiated, difficult to read and understand and more than a little overwhelming. To help you get a handle on this, here’s a step-by-step purchase contract guide for buyers and sellers in Kauai.

Purchase Contract Overview

You may also hear a purchase contract referred to as a real estate sales contract, a home purchase, a real estate purchase contract, or a house purchase agreement. Whatever you call it, every one of them has some common elements and a similar job.

purchase contract, then, “is a binding contract between a buyer and seller that outlines the details of a home sale transaction. The buyer will propose the conditions of the contract, including their offer price, which the seller will then either agree to, reject or negotiate. Negotiations may go back and forth between buyer and seller before both parties are satisfied. Once both parties are in agreement and have signed the purchase agreement, they’re considered to be ‘under contract.’”

The buyer’s agent usually writes (or, more specifically, fills out) the purchase contract/agreement. Because only attorneys can draw up legal contracts, agents typically use standardized contract forms and then just fill in the pertinent information and specifics of the sale.

The specifics in purchase contracts vary in almost every case, and legal requirements vary from state to state. There are, however, some common elements in all such contracts . . . 

  • Information about buyer and seller
  • Necessary property details
  • Pricing and financing information
  • Items to be included in the sale such as fixtures and appliances
  • Amount of earnest money deposit
  • Closing costs and who pays them
  • Conditions that allow contract termination
  • Contingencies on which the sale hangs

Major Components of Purchase Contracts

So now let’s go through the major components of any purchase contract that cause the most confusion among buyers and sellers in Kauai.


“Your real estate purchase agreement will include information about how the home will be paid for. If the buyer isn’t paying in cash, they’ll need some sort of financing (i.e. a loan) to buy the home, the specifics of which will be written out in the contract.”


The earnest money deposit is a good faith deposit that demonstrates the buyer’s seriousness, allowing the seller to know that she isn’t wasting her time. When a buyer puts up this deposit, that shows that she has skin in the game and will likely stick with the transaction. “Earnest money is typically held in escrow by a third party and is credited toward the down payment or closing costs at closing.”

“If, between the time you sign the purchase agreement and close on the home, the buyer decides they want to back out for a reason that isn’t stipulated in the contract, they lose their earnest money and the seller gets to pocket it. However, a buyer can get their earnest money back if they back out due to a reason stipulated in the contract.” 


Contingencies, as the name indicates, are conditions that must be met before the sale can actually go through. And there are several kinds of contingencies, on either or both the buyer’s and seller’s side, that may be included in purchase contracts. Some of the most common are: 

  • Financing contingency – Stipulates that sale depends on the buyer’s ability to obtain financing
  • Appraisal contingency –  “States that the home must appraise at a value equal to or higher than what the buyer agreed to pay”
  • Inspection contingency –  Allows buyer “to back out of the sale without penalty if they aren’t satisfied with a professional inspector’s assessment of the home”
  • Sale contingency – Stipulates that the sale is contingent on the buyer’s selling her current home


At closing, certain fees and costs that are part of preparing and finalizing the transaction must be paid. This part of a purchase contract states who (buyer or seller) pays which fees. “How much each party will pay will depend on what was negotiated in the contract.”

Get the Needed Assistance

Buying or selling a home is a big step with a lot of money involved. It’s critical, then, to have the safeguards that a purchase contract provides in place. The problem, though, is that these contracts are complex, filled with legal jargon, and difficult to understand. That’s why you need the assistance of an experienced Kauai agent. So if you really do want to make sure your purchase contract protects you as a buyer or seller, contact us today at 808-634-4518.

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