Understanding the Memorandum of Agreement in Real Estate and How to File It

A memorandum of agreement (MOA) in real estate is a written preliminary document that outlines the key terms, conditions, and intentions of both buyer and seller before the formal purchase agreement is executed. It serves as a binding or non-binding snapshot of deal essentials, protects both parties' interests, and provides legal documentation that a transaction is in progress. Filing or recording an MOA depends on your jurisdiction and the document's purpose, but generally it is prepared by agents, attorneys, or the parties themselves, reviewed by both sides, and then kept as part of the transaction record.

TL;DR

• An MOA captures the principal deal terms (price, closing date, contingencies) in writing before the formal purchase contract, reducing misunderstandings and disputes.

• Filing requirements vary by location; some jurisdictions record MOAs at the county recorder's office, while others treat it as an internal document between parties and their agents.

• An MOA is typically non-binding unless explicitly stated otherwise, and it must be drafted clearly, signed by authorized parties, and kept for legal protection throughout the transaction.

What Is a Memorandum of Agreement in Real Estate?

A memorandum of agreement is a preliminary written understanding between a buyer and seller (or their representatives) that documents the essential terms of a proposed real estate transaction. Unlike a formal purchase agreement or deed of sale, an MOA is typically shorter, less formal, and drafted early in the negotiation process. It functions as a written record that both parties have agreed to move forward under specific conditions, protecting each side from later claims of misunderstanding or false promises.

The MOA usually includes the property address and legal description, purchase price, earnest money deposit amount, proposed closing date, contingencies (such as inspections or financing), and any special terms or conditions. It may also specify who bears responsibility for repairs, utilities, property taxes during the transaction period, and deadlines for submitting offers or counter-offers. The document demonstrates good faith and intent to transact and often serves as the foundation upon which the formal purchase agreement is built.

Key Components of a Memorandum of Agreement

Property Identification: The MOA must clearly identify the real property being bought or sold. This includes the full street address, unit or lot number if applicable, city, state, zip code, and ideally the legal description (parcel number, subdivision name, or metes and bounds description). Vague property identification can render the agreement unenforceable or create disputes about which property is the subject of the transaction.

Purchase Price and Payment Terms: State the agreed total purchase price in both numerals and words to prevent ambiguity. Include the earnest money deposit amount (the "good faith" deposit), when it is due, where it will be held (escrow account, attorney's trust account), and the source of funds. Specify how the balance will be paid (mortgage, cash, seller financing) and any assumed loans or liens.

Closing Date and Timeline: Define the target closing date or a closing period (for example, "within 30 days of inspection clearance"). Include specific deadlines for contingency fulfillment, such as the inspection period, appraisal deadline, financing approval window, and any other time-sensitive conditions. Clear timelines prevent disputes over whether conditions have been satisfied on time.

Contingencies: List any conditions that must be met for the transaction to proceed, such as buyer approval of home inspections, satisfactory appraisal, clear title report, mortgage approval, or sale of the buyer's current property. Specify what happens if a contingency is not satisfied (typically the buyer can withdraw or renegotiate).

Repairs and Property Condition: Note whether the buyer has inspected the property, which repairs (if any) the seller has agreed to make, and what the property condition is at signing. Address whether the sale is "as-is" or subject to negotiated repairs after inspection.

Title and Possession: Clarify when the buyer will receive possession (usually at closing), confirm that the seller will deliver clear title, and address any title defects or exceptions (homeowner association liens, easements, utility rights).

Disclosures and Deadlines: Include confirmation that required state and local property disclosures will be provided, and specify the deadline for the buyer to review and approve them. This protects the seller by documenting that disclosures were made and the buyer had time to object.

Signature Block: The MOA must be signed by authorized representatives of both buyer and seller. If either party is a corporation, LLC, trust, or other entity, ensure the signatory has authority to bind that entity. Unsigned or improperly signed agreements may be unenforceable.

Is a Memorandum of Agreement Binding?

Whether an MOA is legally binding depends on the document's language, the parties' intent, and local law. In most jurisdictions, an MOA is treated as a non-binding preliminary agreement or "agreement to agree." It expresses mutual intent and captures discussion points but is not the final, enforceable contract. This allows both parties flexibility to negotiate further terms in the formal purchase agreement.

However, if the MOA is explicitly worded as a binding contract and includes all essential terms (price, property, parties, conditions, and signatures), a court may enforce it as the complete agreement. Some jurisdictions recognize an MOA as a binding agreement to enter into a purchase contract if the language clearly indicates that intent. To avoid disputes, the document should clearly state whether it is binding or non-binding. For example, the header might read "This Memorandum of Agreement is a non-binding expression of intent" or "This is a binding agreement and constitutes the entire contract." When in doubt, consult a real estate attorney in your jurisdiction to clarify the legal status of your MOA.

How to Prepare a Memorandum of Agreement

Gather Information: Before drafting, collect the property address and legal description, agreed purchase price, earnest money amount, proposed closing date, contingencies, any special terms, and the full legal names and contact information of both parties.

Choose Your Method: You can prepare an MOA using a template from a reputable real estate organization (many state real estate boards provide forms), hiring a real estate attorney, using your real estate agent's standard form (if working with an agent), or drafting one yourself if you have legal knowledge. Using a template or attorney is safer than drafting from scratch, as it ensures compliance with local laws and includes necessary protective language.

Customize for Your Transaction: Adapt the template to reflect the specific deal. Add any non-standard terms, special contingencies, or local requirements. For example, if the property is in a flood zone or has a homeowner association, address those issues explicitly in the MOA.

Review with the Other Party: Share the draft with the other party (buyer or seller) and their agent or attorney. Be prepared for counter-proposals or requested changes. The back-and-forth negotiation process is normal and expected.

Confirm Signature Authority: Before signing, verify that each party has authority to sign. If a spouse's signature is required by law, include both spouses. If the buyer is represented by an LLC or the seller is a trust, confirm the signer's authority.

Sign and Distribute Copies: Once both parties agree on the language, sign the MOA. Provide fully executed (signed by both parties) copies to the buyer, seller, and any agents or attorneys involved. Keep a file copy for your records.

Filing and Recording a Memorandum of Agreement

The filing process for an MOA varies significantly by location. Check with your county clerk, county recorder, or local land records office to determine whether your jurisdiction requires or permits recording of MOAs and what the process entails.

Jurisdictions That Record MOAs: Some counties and municipalities do accept MOAs for recording in the official real estate records. Recording creates a public notice that a transaction is pending and protects the parties' interests by establishing the date and terms of the agreement. If your area permits recording, prepare the document on the required paper size and format (typically 8.5" x 11" white paper with adequate margins), include a caption identifying it as a memorandum of agreement, ensure both signatures are original (not photocopied), and submit it to the county recorder along with the recording fee and any required cover sheets.

Jurisdictions That Do Not Record MOAs: In many states and counties, MOAs are not recorded. Instead, they are kept by the parties and their representatives as internal transaction documents. The formal purchase agreement is recorded (or the deed is recorded at closing), not the MOA. Confirm with your local recorder's office before attempting to file.

Document Management: Regardless of whether your MOA is recorded, maintain an organized file containing the executed MOA, all counter-proposals or amendments, contingency inspection reports, appraisals, title reports, and all correspondence related to the transaction. This creates a complete record if disputes arise later.

Common Mistakes and How to Avoid Them

Vague or Incomplete Terms: Avoid language like "the price is negotiable" or "closing is sometime in the summer." Define every material term precisely. Use specific dates, dollar amounts, and clear contingency language. Ambiguity invites disputes.

Missing Contingency Details: If the transaction is contingent on financing, specify the loan type, required interest rate, down payment percentage, and deadline for approval. If contingent on inspection, state what types of inspections, the inspection period, and what happens if problems are found.

Failure to Address Title Issues: Confirm that the seller has marketable title and that any known liens, easements, or encumbrances are disclosed and accepted. Avoid assuming the title is clear.

Unsigned or Improperly Signed Documents: Do not rely on email-only agreements or unsigned drafts. Obtain original or legally authorized electronic signatures (if your jurisdiction permits e-signatures) from authorized parties. An unsigned or improperly signed MOA may be unenforceable.

Failure to Comply with Local Law: Real estate law varies by jurisdiction. An MOA that complies in one state may not be valid in another. Consult a local real estate attorney to ensure your MOA meets state and local requirements, especially regarding disclosures, earnest money handling, and contract formation.

Frequently Asked Questions

Is a Memorandum of Agreement the same as a purchase agreement?

No. A memorandum of agreement is typically a preliminary, shorter document that captures the principal deal terms and intent to transact. A purchase agreement (also called a purchase and sale agreement, contract of sale, or offer to purchase) is the formal, legally binding contract that governs the entire transaction, including detailed terms, warranties, remedies, and closing procedures. The MOA often precedes the purchase agreement, providing the foundation for its terms.

Who prepares the memorandum of agreement?

An MOA can be prepared by the buyer, the seller, either party's real estate agent, or a real estate attorney. If working with agents, one agent typically prepares an initial draft reflecting their client's position, which is then reviewed and negotiated by the other agent and party. Using a template or attorney ensures the document complies with local law and includes protective language. In many transactions, the more serious document (the purchase agreement) is prepared by an attorney, and the MOA is a preliminary stepping stone.

What happens if one party breaches the memorandum of agreement?

If the MOA is non-binding (which most are), breach does not give rise to a claim for specific performance or damages; however, the non-breaching party may rely on the MOA to demonstrate the other party's intent to back out without cause, which can inform subsequent negotiations or settlement discussions. If the MOA is explicitly binding and a court finds it enforceable as a complete contract, breach may result in a lawsuit for damages, specific performance (compelling completion of the transaction), or other remedies, depending on your jurisdiction's laws. Document your claim carefully with copies of the MOA, correspondence, and any damages (such as carrying costs or price differences if the buyer or seller sources another deal at a different price).

Can a memorandum of agreement be amended or canceled?

Yes. If both parties agree, an MOA can be amended by executing a written amendment document that clearly identifies the original MOA, specifies what is being changed, and is signed by both parties. The amendment should be dated and kept with the original MOA. To cancel an MOA, both parties should execute a written cancellation or release agreement. Do not simply cross out terms or rely on verbal agreements to modify the MOA; written documentation protects both parties. If one party wants to terminate but the other does not agree, consult a real estate attorney regarding your options under local law.

Sources

• U.S. Census Bureau, QuickFacts, housing, ownership, and local market context.

• U.S. Department of Housing and Urban Development, official guidance on buying, financing, and distressed property.

• GoliathData real-estate records, distressed-property and market data compiled from public records.