💲 What Is a Purchase Price Clause in Real Estate?

A purchase price clause in real estate defines the total amount the buyer agrees to pay for the property and explains how that price is structured. It outlines the earnest money deposit, down payment, financing terms, seller credits, and how any price adjustments may occur during the transaction.

How a Purchase Price Clause Works

The purchase price clause is one of the core terms in the purchase agreement—it defines exactly how much the buyer will pay and how the money is allocated. This clause breaks the price into clear components so both parties understand when funds are delivered and how financing is structured.

Key components include:

  • Total purchase price agreed upon for the property.
  • Earnest money deposit (EMD) amount and due date.
  • Down payment amount and how it will be delivered.
  • Loan amount and financing terms (if applicable).
  • Seller credits toward closing costs or concessions.
  • Adjustments for appraisal, repairs, or negotiations.

This clause ensures there is no confusion about the financial terms of the deal and protects both parties by clearly defining how the purchase price is structured.

Why the Purchase Price Clause Matters

Benefits:

  • Eliminates confusion over how the purchase price is paid.
  • Clarifies earnest money and down payment expectations.
  • Defines financing terms and loan structure.
  • Ensures compliance with lender requirements.
  • Protects both parties during negotiations and appraisal.

Potential Issues:

  • Unclear terms can cause disputes or delays.
  • Missing details can affect loan approval.
  • Price adjustments may require amendments if not clearly written.

Example of a Purchase Price Clause

A buyer agrees to purchase a home for $400,000 with the following terms:

  • Purchase Price: $400,000
  • Earnest Money Deposit: $10,000 within 3 days of acceptance
  • Down Payment: $60,000 at closing
  • Loan Amount: $330,000 Conventional loan
  • Seller Credit: $2,500 toward buyer's closing costs

The clause may also state how the price adjusts if the appraisal comes in low or if repairs are negotiated.

Why the Purchase Price Clause Matters for FSBO Sellers

For FSBO sellers (no listing agent), the purchase price clause is crucial because it outlines every financial term of the deal and prevents misunderstandings.

  • Clarifies what the buyer is truly offering.
  • Ensures the buyer has structured financing.
  • Helps avoid disputes over deposits and payments.
  • Makes counteroffers and negotiations more transparent.

Sellers using Flat Fee MLS through Brokerless benefit from clearer offers and stronger buyer commitments.

Frequently Asked Questions About Purchase Price Clauses

Does the purchase price include closing costs?
No. Closing costs are separate unless the seller provides credits toward them.

Can the purchase price change after the contract is signed?
Yes, if appraisal issues, repairs, or renegotiations occur.

Is earnest money part of the purchase price?
Yes. Earnest money applies toward the buyer’s total funds due at closing.

Does the purchase price clause cover loan terms?
It covers the loan amount, but detailed financing terms appear in the financing clause.