NOTE: THIS INFORMATION IS ACCURATE AS OF JANUARY 1, 2024

Probably the most intimidating part of buying a New Orleans home is sitting down with your agent and going through the Louisiana real estate contract (also called the Residential Agreement to Buy or Sell).

What’s the Louisiana Real Estate Contract?

It’s 9 pages of legalese that addresses just about every single facet of your home purchase.

While it’s not the most interesting topic to read about, buyers must understand what they are signing because, when all parties agree, it’s a contract and there are penalties for breaching the terms.

Grab a seat, and dig in. Feel free to use the table of contents to jump to any section of the contract that most interests you.

Agent information

The top of page 1 records the brokerage information for both the listing agent and selling agent, including how the offer was delivered to the listing agent and when they received it.

That little check box under the seller’s designated agent information is for when the listing and selling agent are the same, known as dual agency.

Read: Why we don’t practice dual agency

Property Description

Lines 1-37 of the Louisiana real estate contract outline the date the offer is written and the details of the property being purchased. It’s important to note all of the items that are automatically included in a sale because if any of them are not going to convey from the seller to the buyer they need to be detailed as exclusions on lines 32-37.

What causes the most disagreements? Window coverings and TV mounts. Window coverings (drapes, blinds, shutters, and the hardware used to attach them) are part of the property unless excluded. Lines 20-26 lines should list any additional items being conveyed, such as pool equipment, furnishings, and moveable appliances like refrigerators, washers, and dryers.

Mineral rights

Next up, in lines 38-42, are mineral rights. The typical New Orleans purchase will have a -0- on line 30 because sellers are not holding onto their mineral rights after selling. We will occasionally (as in very rarely) see sellers retain mineral rights in Plaquemines Parish but it doesn’t mean they can come onto the new owner’s property in order to mine or drill. This paragraph specifically advises that the seller waives all rights to use the surface of the property for any mineral activity.

Price, closing date, contingencies, and financing

Now we’re getting into the meat of the Louisiana real estate contract.

The price being offered is written as both words and a dollar amount, to avoid any confusion about the exact price.

The act of sale date is the same as the closing date. In Louisiana, this is the date that all of the sale documents are signed and the keys are handed over from the sellers to the buyers. Can it be changed? Yes, if all parties agree to the change in writing.

In this same paragraph, the buyer is agreeing to bring “good funds” to the closing, which means either a wire transfer or certified funds. Basically, you can’t show up with a suitcase full of cash or expect to write a personal check for any amount over $2,000.

Occupancy for the buyer is also granted on the Act of Sale date unless all parties have agreed to either a pre-occupancy (buyer moves in early) or post-occupancy (seller has additional time after the act of sale to move). There are a lot of reasons we would counsel our clients not to do either one of those things because there is an inherent risk involved in either being uninsured or an unintentional landlord if something goes sideways and the closing is canceled.

Lines 55-59 outline whether or not the buyer’s offer is contingent on the sale of another property (also called a predicated offer in Louisiana). One of these boxes *must* be checked for an offer to be complete.

Financing Terms

There are 2 basic options for financing. Either the sale is ALL CASH or it is FINANCED.

If the buyer is making an all cash offer, they are warranting that they have the cash readily available to close. That means money in the bank, not in stocks, not in bonds, not in a 401(k). Sellers are advised to always ask for proof of funds from any cash buyer.

If it’s a financed sale, the buyer provides the mortgage terms they are willing to accept to purchase the property, including a loan amount, a maximum interest rate, and the term of the loan. Note that the buyer can opt to accept other financing terms from their lender as long as it doesn’t increase the cost, fees, or expenses to the seller. An example of increased costs to the seller would be a buyer moving from an FHA loan to a VA loan since VA doesn’t allow the buyer to pay for a wood-destroying insect report. This would result in an increased cost to the seller and is not allowed unless agreed to in writing by all parties (remember, it’s a contract!).

The buyer provides additional information about the type of mortgage loan they are attempting to secure (one of the boxes must be checked). Line 76 outlines the maximum amount of discount points the buyer agrees to pay. In our opinion, this line is frivolous because the seller doesn’t care if the buyer is choosing to pay them.

Lines 82-95 outline buyer responsibilities regarding the financing, including that they have the required funds for a down payment, closing costs, pre-paid items, and any other expenses such as inspection costs.

It’s important to note that lines 84-77 explain that any terms or conditions imposed by the buyer’s lender don’t affect the buyer’s responsibility to purchase the house, OR AUTOMATICALLY EXTEND THE CLOSING DATE, unless they involved one of the other conditions agreed to by all parties. For example, if the buyer’s lender cannot produce loan documents by the closing date, it requires a written extension to the contract.

Sellers are not obligated to give buyers more time just because their lender can’t perform.

Lines 87-93 are often disregarded by agents and buyers, and that would be a big mistake. Big, BIG like Pretty Woman big mistake, because the seller can opt to cancel the contract if written documentation from a lender proving that an application has been made and the buyer has given written authorization to the lender that they are moving forward with the loan is not provided.

Prorations and Other Costs

At the act of sale there are multiple items that are prorated including taxes, insurance, rents collected from tenants, and condo or home owner association dues.

To prorate is to divide something in a proportional way, based on time

In Orleans Parish, property taxes are paid in advance, so buyers will be reimbursing the seller for the portion of the year that they will own the house. In all other parishes, property taxes are paid in arrears, so sellers will be crediting the buyer for the months they owned the home prior to the closing. Additionally, for tenant occupied properties, any rents collected for the month of the closing will be prorated between the buyer and seller.

Lines 97-111 outline all of the costs that will paid at the Act of Sale. Buyers pay their own closing costs, including title search, title insurance, and mortgage costs unless there is a written agreement for the seller to pay some or all of those costs. Sellers are responsible for paying any transfer and/or past due taxes and all previous years’ assessments and condo or HOA dues. Sellers are also responsible for paying off any existing mortgage balance, and other fees associated with canceling their mortgage and. Note: the title company will handle payment of all of these costs from the seller’s proceeds.

Appraisal

All Louisiana real estate contracts are either contingent on an appraisal or not. If an appraisal will be performed, the seller provides utilities and access to the property for the appraiser.

Differences in appraised values: if the appraised value of the property is less than the agreed on purchase price, the buyers have the option to ask the seller to reduce the sales price to the appraisal value. If the seller refuses to do so, the buyer can either walk away from the deal (and get their deposit back), agree to move forward and pay the difference between the appraisal and the purchase price, or negotiate some other terms with the seller. Any changes to the contracted price must be in writing.

Deposits

While other states have earnest money, in Louisiana we have deposits. Lines 124-119 outline how much the deposit will be and who it will be held by. Buyers are limited to 72 hours to deliver the deposit before being in default.

If the deposit is held by a 3rd party (usually a title company) both parties should understand that the Louisiana Real Estate Commission may not have jurisdiction in the event of a deposit dispute.

At Crescent City Living, we prefer to hold deposits for our clients who have listed with us, but not every brokerage is the same.

Return of Deposit

Lines 151-169 outline how and why a deposit is returned to a buyer and the contract declared null and void. These events include the buyer canceling the contract during the inspection and due diligence period, or the buyer’s inability to get a mortgage. Additionally, if the buyer doesn’t provide the required letter from their lender as stated in lines 87-93, the seller can cancel the contract and return the deposit.

If the appraisal comes in low (below the purchase price) and the buyer and seller can’t agree on new terms, the contract can be canceled and the deposit must be returned to the buyer.

If the property is tenant-occupied, the buyer can cancel after receiving the leases (see lines 171-175).

If the seller can’t timely provide an approved sewerage and/or water inspection report, the buyer can cancel and get their deposit back.

If the seller opts not to repair or replace a sewer system (septic tank or treatment plant) OR they choose not to repair or replace a private water well system, the buyer can cancel and get their deposit back.

As you can see, there are plenty of buyer protections built into the Louisiana real estate contract.

Leases

A standard term of the contract is that the sale is conditioned on buyers getting a copy of all written leases from the seller within 5 days of executing a contract. The buyer then has 5 days to review and approve the documents or to cancel.

In the case of tenant-occupied properties, all security deposits, keys, and leases are transferred to the buyer at the act of sale, along with the pro-rated rents.

NOTE: Buyers are encouraged to have new leases signed with tenants after they have purchased a property.

Inspection and Due Diligence Period

The inspection and due diligence terms are the source of confusion for many buyers, so we’re going to break it down for you.

The buyer acknowledges that the sale price the property was negotiated based upon the property’s apparent current condition; accordingly, the seller is not obligated to make repairs to the property, including repairs required by the lender unless otherwise stated herein.

What does that mean? It means that inspections are not for beating up the seller. Instead, they are for uncovering any hidden defects, researching the insurability of a property, making sure that a buyer can use the property how they intend to, verifying measurements, zoning, and school districts.

The inspection and due diligence period is the buyer’s chance to be sure they are 100% comfortable with the condition of the property by conducting any non-invasive inspections they want during the negotiated time frame. We always recommend a thorough home inspection and video plumbing inspection but buyers are free to perform other inspections as needed (roof, pool, etc.).

The seller agrees to provide utilities and access for the inspections. If they don’t, the inspection period is automatically extended by however many days the buyer doesn’t have access and utilities. For example, if the seller has turned off the power and it is 7 days into the inspection period before it’s turned back on, the time for performing inspections is automatically extended by 7 days.

What if the buyer finds defects?

If defects are discovered, the buyer has choices to make. They can negotiate repairs or a price reduction with the seller or even choose to cancel the contract and get their deposit back. Any requests for repairs or price reductions must be made in writing before the end of the inspection period. Buyers should note that once a request for repairs has been submitted to the seller, the due diligence period is OVER, whether or not the initial time on the contract has expired.

IF THE BUYER DOES NOT GIVE WRITTEN NOTICE OF EITHER TERMINATION OR DEFICIENCIES AND DESIRED REMEDIES TO THE SELLER WITHIN THE INSPECTION PERIOD, IT IS DEEMED AS ACCEPTANCE BY THE BUYER OF THE PROPERTY’S CURRENT CONDITION

What does that mean? Timelines are important and so is communicating in writing. If it’s not in writing and it’s not on time, then the buyer has lost their ability to ask for repairs or a price change or to cancel without penalty.

Private water/sewerage

We don’t see this in the city of New Orleans, but when it comes to some of the outlying parishes and the North Shore, it’s important to note on the contract if there is private water or sewerage serving the property. If so, there are required addendums that must be signed by both buyer and seller.

Home Warranties

Buyers must decide if a home warranty plan will or will not be purchased at the act of sale, the maximum cost of the warranty, who will pay for it, and who will order the plan.

Typically, if a buyer is asking for a home warranty, they are also asking for the seller to pay for it and for their agent to order the plan. If a buyer plans to purchase their own warranty, it can be included in the contract, but they are not obligated to do so.

Lines 277-280 declare that buyers are aware of the existence of home warranties and they hold the Brokers and Agents harmless if they opt not to have one.

Warranties and Waivers of Redhibition

Buyers must check one of 3 boxes in this section of the contract.

Line 282 (A) is a sale with warranty. In all of our years, we’ve never seen a Louisiana real estate contract with this box checked.

Line 285 (B) is an “as is” sale without warranties. This is the box we see checked on all contracts except those for new construction. While the buyer is agreeing to purchase the property “as is”, they aren’t giving up any of the other rights to inspections and appraisals. What this means is that after the inspections, after the appraisal, after the buyer’s mortgage has been approved, the buyer is taking the property in condition it’s in on the act of sale date and waiving his/her right of redhibition.

Line 292 (C) is checked when the property is new construction and the Louisiana New Home Warranty Act is required by law.

Merchantable Title

As part of the Louisiana real estate contract, the seller agrees to provide a merchantable title to the buyer. If there are any title issues that need to be addressed before the act of sale, and they will extend the time needed to close past the agreed upon closing date, line 301 outlines how many days the contract will be AUTOMATICALLY extended.

The seller pays all of the costs for the clear title and if they cannot perform the buyer has the right to demand the return of their deposit and to recover from the seller any actual costs incurred during the process (inspections, appraisals, etc.) as well as legal fees.

Getting a deposit released is easy. But if the seller refuses to reimburse the buyer for their costs the buyer will be forced to pursue legal action at their own expense. Should this happen, it’s likely the buyer would be awarded legal fees, but not guaranteed (because we’re not attorneys).

Final Walk Through

The buyer has the right to do a final walk through within 5 days of the Act of Sale. This is your chance to ensure all agreed upon repairs have been done and that the property is in the same or better condition as when the offer was written.

If it’s important to a buyer that the house be cleaned before they move in, it should be included as an additional term and condition on lines 359-368, since the contract does not address cleanliness.

What if the seller defaults?

If the seller defaults on the terms of the contract, the buyer has the right to declare the contract null and void and get their deposit back.

The alternative solution is to demand and/or sue the seller for specific performance (a judge forces them to sell the property) or for termination of the agreement with 10% of the sales price as damages. Again, this requires the buyer to engage legal services and advice.

What if the buyer defaults?

If the buyer defaults, the seller has the right to declare the contract null and void and retain the buyer’s deposit.

Alternatively, just as the buyer can sue a seller in default, the seller can also sue the buyer for specific performance or for termination of the agreement with 10% of the contract price as damages.

Again – we’re not giving legal advice. It’s important to consult with your attorney in these cases.

Notifications

Lines 335-349 inform buyers on how to get information on common mold related hazards, how to access the Louisiana State Sex Offended and Child Predator Registry, and where to find data on flood hazards from FEMA.

Choice of law and deadlines

All Louisiana real estate contracts are written in accordance with the laws of that State of Louisiana, no matter where the buyer and/or seller may currently be residing.

All deadlines in the contract are final except where changes are agreed to in writing by both parties and all calendar days end at 11:59 in Louisiana. Why is the time important? Because if someone is in another time zone, they need to be aware that the deadlines are based on Louisiana time.

Additional terms and conditions

Lines 359-368 allow your agent to insert additional terms to the contract. This is the buyer’s chance to require that the property be broom clean at the act of sale, to ask for tenant occupied properties to be vacant on the sale date, or to outline any other conditions buyers may have.

Roles of brokers and agents

We are real estate brokers and agents and it’s our job to bring buyers and sellers together. We don’t warranty property condition, measurements, square footage, or any of the other details outlined in lines 374-378. Buyers should always investigate any property conditions that are important to them during their due diligence period.

Agents and brokers also are not responsible for the quality of the services of third parties such as inspectors, lenders, or appraisers.

Addenda

If addendums are part of the contract, the appropriate boxes should be checked off on lines 391-394.

Terms of addenda override the pre-printed terms of the Louisiana real estate contract.

Contract terms, acceptance, notices

All contract terms are singular or plural, masculine or feminine or neutral, as the terms apply to buyers and sellers.

Acceptance of a Louisiana real estate contract MUST BE IN WRITING and can be executed by the use of electronic signatures.

All notices and communications related to the contract MUST BE IN WRITING and all parties agree that electronic documents and digital signatures are acceptable and will be treated as originals.

Lines 409-414 contain authorization for the buyer and seller agents to receive notices on behalf of their client at the email addresses provided.

Still with me?

Whew. We’re at the end, y’all.

If there are 3 lines of the contract that it’s important for everyone to understand, it’s lines 416-418, because they outline that the Louisiana real estate contract is a LEGALLY BINDING CONTRACT when signed by all parties. You should always read everything before signing and seek legal advice if you don’t understand the effect of any part of the contract. These lines also advise seeking legal advice before attempting to enforce any terms of the contract.

Lines 420-421 reinforce that all terms of the sale are included in this contract and any terms not included are void and of no force. No verbal agreements allowed, folks.

Line 423 outlines the expiration date and time of the offer. While some states allow a buyer to rescind an offer, Louisiana does not. The offer is BINDING AND IRREVOCABLE until the date and time listed on the contract and if it’s accepted, the acceptance has to be communicated in writing by the expiration deadline.

Lines 427-437 are for the offering party (usually the buyer) information and signature/date.

Line 445 is the status of the offer. It can be accepted as is, rejected, or countered. If countered, a counter offer must be attached to the response and the original offer is signed/dated by the responding party (usually the seller).

It’s the end!

Are you exhausted and confused?

That’s OK. It’s why you hire a great New Orleans REALTOR, because we know this stuff in and out and can help protect your best interests no matter what side of the contract you may be on.

Download a copy of the most recent Louisiana Purchase Agreement here

Give us a call with any of your questions. 504-327-5303