How to Review a Commercial Real Estate Purchase Agreement
A practical review order for a commercial real estate purchase and sale agreement before either side signs — from the deposit to the default remedies.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
A commercial real estate purchase and sale agreement (PSA) controls how much money is at risk, how long you have to investigate the property, what happens if financing falls through, and who wins if the deal breaks. The risk usually sits in the timing and the remedies, not the headline price.
The safest review order is not page one to signature. Start with the business deal (price, deposit, dates), then the contingencies that let you walk, then title and condition, then the default and remedies clauses that decide what happens if someone does not close.
Topics to check
Map the dates before anything else: the effective date, the end of the due-diligence period, the financing deadline, the date the earnest money becomes non-refundable ("goes hard"), and the closing date. In commercial deals the calendar is the contract — most leverage is lost by missing a date, not by misreading a clause.
Confirm how the earnest money is held, when it is applied to the price, and the exact moment it stops being refundable. A deposit that goes hard on signing converts your option to investigate into a commitment to buy.
Earnest money (Cornell LII Wex)The same PSA reads very differently for the buyer and the seller. A buyer wants a long, freely terminable due-diligence period, a refundable deposit, a financing contingency, broad title-objection rights, and specific performance if the seller walks. A seller wants a short, firm period, a quickly non-refundable deposit, an AS-IS sale, discretion to cure title, and a liquidated-damages cap on its exposure.
Decide which side you are on, then test every clause against that goal. A clause that is "market" for one side can be a trap for the other.
Real estate purchase contracts are governed mostly by state common law and the statute of frauds, which requires a contract for the sale of land to be in writing. Many outcomes — whether a court will order specific performance, whether a liquidated-damages clause is enforceable, who bears risk of loss before closing — depend on the state and the exact wording.
Use the contract to allocate risk, but confirm enforceability of the remedy, deposit-forfeiture, and risk-of-loss clauses with local counsel before relying on them.
Statute of frauds (Cornell LII Wex)Key takeaways
- Map the full calendar first — effective date, due-diligence end, financing deadline, deposit hard date, and closing.
- Know the exact moment the earnest money becomes non-refundable.
- Review from your side: buyer and seller want opposite things from the same clauses.
- Real estate contracts must be in writing; remedies and risk-of-loss rules vary by state.
- Build a short issues list tied to specific clauses before you sign.
Official resources
Legal-review notes
Guide confidence marker: Medium confidence.
- Review order and clause priorities are general guidance, not jurisdiction-specific conclusions.
- Specific performance, deposit forfeiture, and risk-of-loss outcomes vary by state and require counsel review of the actual contract.
Frequently asked questions
What is the difference between an LOI and a purchase agreement?
A letter of intent (LOI) usually outlines the deal and is largely non-binding except for clauses like exclusivity and confidentiality. The purchase and sale agreement (PSA) is the binding contract. Confirm which document you are signing and which terms in the LOI actually bind the parties.
When does my earnest money become non-refundable?
It depends on the contract. Many commercial PSAs make the deposit refundable during the due-diligence period and non-refundable ("hard") after it ends, but some make it hard on signing. Find the exact trigger before you wire funds.
Is this legal advice?
No. This is general information. Enforceability of deposit-forfeiture, specific-performance, AS-IS, and risk-of-loss clauses depends on your state and the exact language — confirm with a qualified real estate attorney.