A California land purchase agreement is a contract that is used for an exchange of real estate between a seller and a buyer. Other names for a California land purchase agreement include a vacant land purchase agreement, an installment land agreement, and an agreement of forms.

What Are Land Purchase Agreements?

Realtors in California typically use a vacant land purchase agreement to facilitate the sale of real estate. With this form, the current owner of the real estate and the interested buyer create a contract.

Sellers and buyers can include a variety of requirements in a California land purchase agreement:

  1. Purchase price and payment terms
  2. Interest rates
  3. Fees based on taxes and insurance

Cost Allocation

The person selling a piece of real estate will be responsible for covering a number of costs related to the sale. Although septic systems are rarely found on vacant lots, if there is a septic system, the seller will need to pay for an inspection. Similarly, the seller may need to pay for a perc test to see if the soil is suitable for waste disposal.

Other costs that the seller may be responsible for can include marking of the property corners and determining if the wells on the property produce an adequate amount of water.

Documentation and Disclosure Requirements

Land purchase agreements include a section where the seller will disclose important information about the property. This section will specifically require the seller to reveal any information that would be pertinent to the buyer. For example, if there is an endangered species that lives on the lot that may interfere with the buyer's ability to use the property, the seller must disclose this information. The seller also needs to inform the buyer if the deed to the lot comes with any restrictions.

A land purchase agreement will also contain a section that outlines the Buyer's Investigation period. In this section, there should be a list of items that a buyer should investigate to make sure that the property lives up to their expectations.

Buyers must complete their investigation in a set amount of time. While the default investigation period is 17 days, most buyers will request more time so that they can do their due diligence. A thorough investigation usually takes between 30 and 60 days. Sellers will also have a defined period where they will need to disclose information about the property. The default disclosure period is 10 days. Both the disclosure and investigation periods begin at the opening of escrow.

Once the Buyer's Investigation is complete, the seller can ask the buyer to remove any contingencies they have placed on the agreement. If the buyer removes these contingencies, the seller may be able to keep the buyer's deposit if they leave the agreement. Usually, the seller can only keep the deposit if they hold no fault for the buyer backing out of the deal.

No standard time period exists for contingencies or escrows. The defined period for these events can vary from agreement to agreement and are influenced by how long the buyer believes it will take to complete their investigation. Buyers should consider requesting a longer contingency period so that they can be sure that the property they're interested in purchasing actually meets their needs.

Land Purchase Agreement Terms

Much of a land purchase agreement will consist of boilerplate terms. Some contracts, however, will contain additional information, meaning both buyers and sellers should carefully review the terms of any proposed agreement.

For instance, every land purchase agreement needs a full, accurate description of the property. If the description in the agreement is vague, or if the description doesn't match the reality of the property, a condition should be added to the agreement that the purchase will only take place after an engineered survey. Banks will almost always insist on a survey when financing the purchase of real estate.

One of the buyer's main goals in a purchase agreement should be negotiating a low price. The description of the price in the agreement must reflect the price agreed to during negotiations. The buyer should also request a low upfront deposit so that they will have the cash needed to cover important costs such as soil tests. Also, a low deposit means the buyer won't lose as much money if they later back out of the sale.

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