What is a real estate purchase contract and why is it important?

A real estate purchase contract is a legally binding document that regulates the buying or selling of land. It is crucial as it establishes the rights and obligations of both the buyer and the seller, ensuring that both parties fulfill their commitments. The purchase of house or an apartement is a significant financial transaction, and a purchase contract provides protection and security for both parties.

real estate purchase contract

What information should be included in a real estate purchase contract?

This contract is an important document designed to ensure that all relevant aspects of the real estate purchase are detailed and clearly defined. Here are the key points that should be considered in such a contract:

  • Identification of the parties: The contract must include the full names, addresses, and contact details of the buyer and seller.
  • Description and designation of the real estate: A comprehensive description and designation of the property are essential. This includes the exact location, size, and any special features of the land to avoid any misunderstandings.
  • Purchase price, payment terms, and deadlines: The agreed-upon purchase price, as well as details of payment terms, down payments, installment payments, and due dates, must be clearly defined.
  • Relevant dates: Clear deadlines and conditions for completing the purchase, including the handover date and other relevant dates, need to be established.
  • Condition and details of the property: The current condition of the property at the handover, details of installations, building components, renovation work, wear and tear, and any potential defects should be described.
  • Tax regulations: Questions regarding land gain tax and other tax-related aspects must be clarified.
  • Rights and obligations of the parties: Both buyers and sellers have specific rights and obligations. This includes inspections, repairs, insurance, potential encumbrances in the land register, easements, debts to craftsmen or tax authorities, and more.
  • Contracts and plans: Any existing lease agreements, building rights contracts, and development plans must be considered in the purchase contract.

After concluding discussions with the buyer and seller, it is the task of the notary to draft the contract and any attachments. Subsequently, the purchase contract must be signed by the buyer, seller, and notary. However, it should be noted that you are only considered the owner with the entry in the land register.

After the public certification of the real estate purchase contract, the notary reports the change of ownership to the land registry office. Depending on the workload, it may take several weeks for the entry to be completed.

Legal aspects in concluding a real estate purchase contract

When concluding a real estate purchase agreement, there are various legal aspects to consider to ensure that the contract is valid and enforceable. Here are some important points:

  • Notarial certification: In Switzerland, a real estate purchase contract must be notarially certified. A notary reviews the contract and confirms its legality. This ensures legal security for both parties.
  • Land register: A real estate purchase agreement must be registered in the land register to officially transfer ownership. The notary usually takes care of this registration.
  • Warranty: The seller is generally obligated to provide certain warranties to the buyer, such as the warranty of freedom from defects in the land. These warranties should be clearly defined in the contract.

How does a real estate purchase contract differ from a lease agreement?

A real estate purchase contract fundamentally differs from a lease agreement. While a real estate purchase agreement regulates the buying or selling of land, a lease agreement governs the rental of real estate. A purchase contract leads to a change in ownership, whereas a lease agreement gives the tenant the right to use the land for a specified period without acquiring ownership.

What costs are associated with the conclusion of a real estate purchase contract?

Various costs arise when concluding a real estate purchase contract, and these must be borne by the parties involved. These include:

  • Notary costs: The costs for notarizing the contract are often shared between the buyer and seller. These costs vary depending on the value of the land and individual agreements with the notary. They typically range between 0.1% and 1% of the purchase price.
  • Land registry fees: Registering the purchase agreement in the land registry incurs fees, also commonly shared between buyer and seller. These fees vary depending on the canton and the value of the land.
  • Taxes: When buying land, taxes may also apply, such as the land gains tax, which is usually paid by the seller, or transfer taxes. The exact tax amounts vary depending on the canton and individual circumstances.

For more information, please refer to our article on costs when buying a house.

How long is a real estate purchase contract valid?

A real estate purchase contract is generally valid until all agreed-upon conditions are met, and the transfer of ownership has taken place. The exact duration of the contract depends on the individual agreements of the parties. It is important that the contract includes all relevant deadlines and conditions to avoid misunderstandings.

Rights and obligations of buyer and seller in a real estate purchase contract

A purchase agreement specifies the specific rights and obligations of both the buyer and the seller. Here are some important points:

  • Buyer: The buyer has the right to visit the real estate to ensure it meets the agreed-upon conditions. They are also obligated to pay the agreed-upon purchase price and adhere to the agreed-upon payment terms.
  • Seller: The seller is obligated to transfer the land in the condition stipulated in the contract. They also have the duty to provide the buyer with all necessary information about the land.

Consequences of non-compliance with the real estate purchase contract

The non-compliance with a land purchase agreement can have various consequences, depending on the individual agreements and the applicable laws. Possible consequences may include:

  • Compensation: If one party fails to fulfill its obligations under the contract, the other party may demand compensation. This can cover the financial damage incurred.
  • Contractual penalties: In some cases, the contract may stipulate contractual penalties that become due in case of non-compliance. These penalties are intended as a deterrent and to ensure compliance with the contract.

Can a real estate purchase contract be reversed?

A real estate purchase contract can be reversed in certain cases, depending on the individual agreements and applicable laws. A withdrawal, for example, may be possible if one party has seriously violated its obligations or if certain conditions have not been met. It is important that the contract includes clear provisions regarding a possible withdrawal.

The role of the notary in the purchase contract

A notary plays a crucial role in concluding a purchase contract. The notary reviews the contract to ensure it complies with legal requirements and protects the interests of both parties. The notary authenticates the contract and takes care of its registration in the land register. The involvement of a notary ensures the legality and validity of the contract.