Approved-source preservation: The recovered contracts working manuscript remains preserved in Chapter 17. This chapter develops purchase agreements, offers, counteroffers, contingencies, and transaction timelines into their proper destination.

Learning Objectives

• Identify the major business and legal terms of a real estate purchase agreement.
• Explain offer preparation, presentation, acceptance, rejection, counteroffer, revocation, and expiration.
• Draft clear brokerage-level entries for parties, property, price, financing, deposits, personal property, possession, and closing.
• Explain financing, inspection, appraisal, title, sale-of-property, and association contingencies.
• Distinguish addenda, amendments, notices, disclosures, and counteroffers.
• Build and manage a transaction deadline timeline.
• Recognize terms requiring Indiana source verification or legal drafting.

Key Vocabulary

Term	Definition
Purchase Agreement	A contract setting terms for transfer of real property.
Offer	A proposal intended to create a contract upon timely and proper acceptance.
Counteroffer	A response changing terms and creating a new offer.
Revocation	Withdrawal of an offer before effective acceptance, subject to law and any option.
Expiration	End of an offer or right at the stated time.
Earnest Money	A deposit demonstrating intent and handled according to the agreement and law.
Contingency	A condition that must occur or be satisfied for specified obligations to become final or continue.
Financing Contingency	A provision allocating risk if the buyer cannot obtain defined financing.
Inspection Contingency	A provision allowing investigation and specified responses within stated deadlines.
Appraisal Contingency	A provision allocating risk when appraised value does not meet a stated level.
Title Contingency	A provision addressing acceptable title evidence, objections, and cure.
Closing	The process completing required documents, funds, and transfer.
Possession	The buyer’s contractual right to occupy or control the property at the agreed time.
Time Is of the Essence	Language making punctual performance a material contract requirement.
Escrow	Holding money or documents by a neutral or authorized party under stated instructions.

Core Lesson

The Purchase Agreement Is the Transaction Map

A strong agreement answers who, what, how much, how financed, what is included, what must be investigated, who bears each risk, when performance is due, how notices are delivered, when possession changes, and what happens if performance fails. A vague form entry can create a dispute even when the printed form is excellent.

Parties and Authority

Use correct legal names and identify the capacity in which each signer acts. All necessary owners and properly authorized buyers should sign. Trusts, estates, guardianships, corporations, LLCs, powers of attorney, divorces, and deceased owners require early authority review. A nickname or an unsigned co-owner can delay or defeat closing.

Property and Included Items

Identify the real estate using the form’s required address, parcel, and legal-description method. Clarify fixtures, leased equipment, solar systems, water treatment, fuel, appliances, furnishings, manufactured-home title, and excluded items. Personal property may require separate treatment because financing, appraisal, tax, and title consequences differ.

Price, Financing, and Proof of Ability

State purchase price, cash, loan type, down payment, financing amount or ratio, interest limitations if used, application and approval deadlines, seller financing terms, and appraisal provisions. Prequalification is not final approval. Financing contingencies should define the buyer’s required effort, acceptable loan, notice, documentation, and outcome if financing fails.

Earnest Money

The agreement should state amount, form, deadline, holder, deposit procedure, and disposition. Earnest money is not automatically the seller’s money when deposited and is not an automatic measure of damages. Disbursement follows the contract, law, escrow rules, mutual release, court order, or other authorized process. Brokers must not improvise.

Offer Life Cycle

An offer may end by rejection, counteroffer, revocation before acceptance, expiration, death or incapacity in some circumstances, destruction of subject matter, or operation of law. A counteroffer ordinarily rejects the original offer. Acceptance must be unqualified and timely. If acceptance is late, it may function as a new offer rather than creating the original contract.

Present offers objectively and promptly as required. Document when the offer was received, delivered, signed, rejected, countered, revoked, and communicated.

Contingencies Allocate Risk

Inspection

Define the inspection period, permitted investigations, access, restoration, reports, notice method, available responses, repair negotiations, and termination rights. “Subject to inspection” without deadlines or remedies is dangerously incomplete.

Financing and Appraisal

Financing asks whether the buyer can obtain the defined loan. Appraisal asks whether collateral value meets the contract’s threshold. They are related but separate. A buyer can qualify for a loan while the appraisal is low, or the property can appraise while the buyer fails underwriting.

Title and Survey

Specify title evidence, delivery, objection, cure, survey, and closing consequences. Marketable title is not the same as perfect title. Easements, restrictions, and permitted exceptions may remain.

Association and Seller Documents

Provide deadlines to obtain and review declarations, budgets, assessments, resale information, leases, and seller disclosures when applicable. The contract should state consequences of untimely delivery or objection according to governing forms and law.

Sale of Buyer’s Property

A home-sale contingency should define the property, listing status, required contract, deadlines, proof, continued marketing, kick-out rights if used, and termination mechanism. Vague contingencies create uncertainty for both parties.

Closing Costs, Prorations, and Possession

Allocate title services, recording, transfer charges, lender costs, survey, inspections, association fees, taxes, rents, deposits, utilities, and agreed concessions. State possession clearly. Possession before or after closing creates occupancy, insurance, maintenance, casualty, and holdover risks best handled by appropriate written agreements.

Changes After Formation

Use a written amendment signed by affected parties. Do not alter dates or terms on the original without proper agreement. A repair request is not automatically an amendment; it becomes binding only through the required acceptance and form.

Transaction Timeline

Build a timeline from the final accepted agreement—not from memory. Include earnest money, loan application, inspection, response, appraisal, title, survey, association review, insurance, utility transfer, walk-through, funds, closing, and possession. Update the timeline after every amendment.

Indiana Law Spotlight

Partially verified against current authority. IC 25-34.1-10 places timely offer and counteroffer handling within Indiana's statutory duties to represented sellers, landlords, buyers, and tenants, subject to the statute and lawful client direction. It also requires reasonable skill and care and distinguishes duties owed to clients from duties owed to other parties. IC 32-21-5 supplies Indiana's residential sales-disclosure framework for covered transfers.

IC 26-2-8 recognizes qualifying electronic records and signatures when the parties have agreed to transact electronically, but electronic format does not replace required content, authority, consent, communication, or delivery. Current PLA guidance separately confirms that seller and buyer representation agreements may be paper or electronic, must contain a definite expiration date, be copied to the client within three business days after signing, and be retained with related electronic files.

Practical brokerage application: Log when every offer, counteroffer, rejection, revocation, signature, disclosure, deposit, notice, and amendment is received, transmitted, and acknowledged. Earnest money must remain in the authorized handling process; a broker must never decide entitlement or release disputed funds by personal judgment.

Verification flag: Exact offer-presentation timing and waivers, multiple-offer procedures, formation and delivery rules, earnest-money deposit and dispute procedures, disclosure forms and exemptions, electronic receipt, purchase-agreement forms, retention periods, drafting limits, discipline, and controlling decisions remain queued. No unverified Indiana deadline or disbursement result is taught as universal.

Official sources: Current Indiana Code Titles 25, 32 and 26; 876 IAC Articles 8 and 9; Indiana Real Estate Commission; PLA written-agreement requirements; Indiana appellate decisions.

National Exam Alert

Changed terms equal a counteroffer. A financing contingency and an appraisal contingency protect against different risks. Earnest money belongs in the authorized handling process, not automatically to either party.

Common Exam Trap

Do not assume “accepted” merely means signed. Do not confuse closing with possession. Do not promise repairs or credits until the agreement is written and accepted.

PASS FIRST Memory Trick

P-P-P-D: Parties · Property · Price · Deadlines. If one is unclear, stop and clarify.

Broker Insight

After acceptance, send a one-page timeline showing every date, responsible party, and source paragraph. Reissue it after amendments. Missed deadlines destroy leverage faster than poor negotiation.

Chapter Summary

• Purchase agreements convert negotiated terms into enforceable duties.
• Correct party names, authority, property description, and included items matter.
• Counteroffers create new offers; acceptance must be timely and match.
• Contingencies allocate specific risks and require precise deadlines and remedies.
• Earnest money is handled under contract, law, and escrow procedure.
• Closing and possession are separate concepts.
• Post-formation changes require proper amendment.
• Indiana's statutory offer-handling, residential-disclosure, electronic-record/signature, and written representation-agreement framework is partially verified; exact timing, waivers, escrow, forms, delivery, retention, drafting limits, discipline, and fact-specific outcomes remain queued.

Practice Questions

1. A seller changes price and signs the offer. The seller created a:
   1. Acceptance
   2. Counteroffer
   3. Closing
   4. Deed
2. A buyer signs after the offer expired. The signature most likely creates:
   1. A possible new offer, subject to communication and acceptance
   2. Automatic original contract
   3. Title transfer
   4. Tax lien
3. Which contingency addresses inability to obtain a defined loan?
   1. Appraisal only
   2. Financing
   3. Title only
   4. Survey only
4. Which addresses collateral value below a stated level?
   1. Escrow
   2. Financing only
   3. Possession
   4. Appraisal contingency
5. Earnest money is:
   1. Handled according to contract, law, and authorized escrow process
   2. Automatically seller’s upon deposit
   3. Always the same as damages
   4. Optional after closing only
6. A repair request becomes binding when:
   1. Buyer thinks it
   2. Inspector recommends it
   3. It is properly agreed in writing as required
   4. Broker promises it
7. Which best distinguishes closing and possession?
   1. They are always identical
   2. Possession creates taxes
   3. Closing completes transfer steps; possession occurs at the contractually agreed time
   4. Closing is inspection
8. A property is owned by an estate. First concern?
   1. Paint color
   2. Authority of the personal representative or required signers
   3. GRM
   4. Setback only
9. “Subject to inspection” without deadline or remedy is:
   1. Clear
   2. A title policy
   3. A deed
   4. Risky and incomplete
10. A buyer qualifies but appraisal is low. This shows:
    1. Financing and appraisal are separate risks
    2. They are identical
    3. Title failed
    4. Possession occurred
11. Which source controls included personal property?
    1. Assumption
    2. Clear written agreement
    3. Listing photo only
    4. Neighbor statement
12. A seller rejects an offer. The offer is generally:
    1. A deed
    2. Automatically accepted later
    3. Terminated
    4. Recorded
13. Revocation generally must occur:
    1. Before effective acceptance, subject to an option or law
    2. After closing only
    3. After deed recording
    4. Never
14. Which provision should state loan type and approval terms?
    1. Tax assessment
    2. Legal description only
    3. Possession only
    4. Financing provision
15. Title contingency primarily addresses:
    1. Paint repairs
    2. Loan underwriting
    3. Acceptable title evidence, objections, and cure
    4. Commission
16. Possession before closing should be:
    1. Assumed verbally
    2. Addressed with appropriate written risk allocation
    3. Ignored
    4. Granted by MLS
17. A home-sale contingency should identify:
    1. Only tax rate
    2. Nothing specific
    3. Only color
    4. Deadlines and the buyer’s property and required events
18. After an amendment changes inspection deadline, the broker should:
    1. Update the transaction timeline
    2. Use old date
    3. Erase records
    4. Ignore it
19. A broker receives two offers. Best general practice?
    1. Choose buyer secretly
    2. Hide one
    3. Present according to seller instructions and current law/rules without favoritism or concealment
    4. Guarantee both
20. An Indiana-specific earnest-money dispute arises. Broker should:
    1. Improvise payment
    2. Ignore records
    3. Give funds to friend
    4. Follow current contract, law, escrow rules, and authorized direction

Detailed Answer Explanations

1. B. Changing price makes a new proposal rather than mirror-image acceptance.
2. A. Late acceptance cannot revive an expired offer automatically; it may function as a new offer.
3. B. Financing contingency allocates risk of obtaining the defined loan.
4. D. Appraisal contingency addresses value, separate from buyer qualification.
5. A. The holder cannot decide ownership casually; disbursement follows governing authority.
6. C. Repair obligations become contractual through proper written agreement.
7. C. Transfer and occupancy may occur at different times under the contract.
8. B. Estate title requires verification of legal representative authority and required approvals.
9. D. A useful contingency defines period, notice, choices, and consequences.
10. A. Underwriting and collateral valuation can succeed or fail independently.
11. B. Written terms prevent fixture and personal-property disputes.
12. C. Rejection terminates the offer unless renewed.
13. A. Revocation must precede effective acceptance unless the offer is held open by enforceable option or law.
14. D. Financing terms belong in the financing provision and related addenda.
15. C. Title provisions control evidence, objection, cure, and consequences.
16. B. Early occupancy creates major casualty, insurance, maintenance, and holdover risks requiring writing.
17. D. Precision is essential for the property, timing, continued marketing, proof, and termination rights.
18. A. The operative amendment replaces the old deadline, so tracking must change.
19. C. Offers are handled according to agency duties, lawful instructions, and current presentation rules.
20. D. Escrow disputes require strict compliance; brokers cannot self-judge entitlement.

Mastery Checklist

• I can identify every major purchase-agreement term.
• I can track offer, acceptance, counteroffer, revocation, and expiration.
• I can distinguish financing and appraisal contingencies.
• I can draft clear inspection, title, and sale-of-property timelines within authorized forms.
• I can explain earnest-money handling without promising disbursement.
• I can separate closing and possession.
• I can distinguish disclosures, addenda, amendments, notices, and counteroffers.
• I can verify party and entity authority.
• I can identify Indiana rules requiring current verification.
• I can score at least 80% and explain every answer.