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Your Guide to Raw Land Purchase Agreements in Illinois

Your Guide to Raw Land Purchase Agreements in Illinois

row land for sale sign

Raw land purchase agreements feature a few basic provisions, including purchase price, due diligence period, final closing conditions, and default and remedy. These provisions are specifically created to safeguard the interests of both the seller and the buyer. They are an important part of the purchase agreement.

Purchase Price Provision

A raw land purchase agreement has an important provision that deals with the purchase price and payment arrangements available to the potential buyer. Valuation of raw land can be hard because its value is mostly contingent on its future development potential. The seller may ask for an initial down payment, an additional down payment, and a final payment at closing. The seller may accept to finance the purchase price, either some or all of it.

Due Diligence Period Provision

This provision specifies the amount of time the potential buyer has to carry out due diligence on the land. The due diligence time frame is the period between the initial down payment date and the closing date. This period offers the buyer a chance to collect more information about the raw land, review its condition, and determine the validity of its title. A real estate attorney can inspect title paperwork on the buyer’s behalf and make sure the land is dispute-free.

This provision offers the potential buyer the option to dismiss the agreement with a full reimbursement of any down payment if the buyer is unhappy with some aspects of the land after performing due diligence. Issues to consider include land zoning, accessibility, existing easements for utilities, and environmental degradation issues.

Final Closing Conditions

Conditions that come before final closing are a fundamental part of the purchase agreement. Common final closing conditions include an adequate review of the land’s condition and legitimacy of its title, valuation of the land for an amount close to the purchase price, and acquiring financing to buy the land or the buyer selling a different piece of land. The number and type of final closing conditions in a purchase agreement depend on the negotiation between the buyer and seller.

Default and Remedy Provisions

These provisions define agreement defaults and specify remedies available to each party when the other party defaults. If the seller defaults, for instance, the buyer can exercise specific performance to compel the seller to sell the land. The agreement should also specify what happens to any down payment after either party defaults.

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