The increased amount of steps involved with the sale provide many opportunities for one party or the other to become unsatisfied with the transaction.
This is where the purchase and sales agreement comes in. It is a legally-binding contract between the buyer and seller that outlines the conditions that must be met to complete the sale.
This document is critical to the process of buying and selling real estate. It benefits both the buyer and the seller and ensures everyone gets what they want.
There shouldn’t be any surprises throughout the sales process. The purchase and sales agreement thoroughly describes what is to be expected to avoid negative discoveries between the initial offer and the eventual closing day.
And to better understand this important contract, we’ll look into the issues that are addressed within it.
So what’s in a purchase and sales agreement?
- Basic Buyer and Seller Information
- Express Intention to Buy and Sell
- Description of the Property
- Outline of Finances
- Responsibilities of the Seller
Basic Buyer and Seller Information
As this is a legal contract, it’s important to include specifics relating to the people involved in the transaction. This agreement is between two specific people (or business entities) and they need to be clearly defined.
This will include the full names of participants in the transaction, their addresses, phone numbers, and so on. It will also include the information for any co-signers
Other basics such as the date of the initial agreement and the closing date will also be included. As will any deposits that have already been paid and outstanding portions of the contract.
Express Intention to Buy and Sell
The contract must clearly state the nature of the transaction. It must be clearly stated that transfer of ownership is to commence upon completion of all stated prerequisites.
The related rights of the buyer and seller will also be outlined in this section. Remember, this contract acts in the best interest of everyone involved in the transaction.
Any provisions to the sale must be included to ensure all information related to possible encumbrances are known before closing.
Description of the Property
A thorough description of the property is also included in the purchase and sales agreement. This will include any problems with the property that are known at the time of writing the contract. This is important to make sure the buyer has recourse if they aren’t informed of major problems with the property that are found immediately after the sale.
This can also allow the buyer to perform their own inspections to ensure the state of the property is as outlined by the seller. A clause might also be included that allows the buyer to terminate the contract if it is found to be unsatisfactory at the end of the process.
Outline of Finances
Real estate transactions frequently have complicated financing strategies because of the large amounts of money involved. This section of the purchase and sales agreement will outline the various specifics involved with the financial strategy.
This includes the amount of money to be placed as a down payment, the amount to be financed, interest rate, escrow, sales tax, and any other financial considerations to be made relating to the sale.
Terms will be outlined for the termination of the contract should proper financing not be procured in time.
Responsibilities of the Seller
The seller must maintain the property up until the transfer of the deed. This section outlines the extent of these responsibilities.
This includes paying the property tax until the closing date, keeping the property from falling into disrepair, and insuring the property throughout the sales process.
Any necessary repairs will also be outlined in this section of the purchase and sales agreement. Deficiencies found in the inspection can be negotiated between the buyer and seller. Repairs are frequently agreed upon and included in the seller’s responsibilities.
Purchase and sales agreements are what is commonly known as a “living document.” This means that they are frequently updated as the transaction moves along, and new items are either found or changed.
These updates can be added by either the buyer or the seller and must be agreed upon by both parties.
Addendums can be added if, for instance, more time is needed to complete certain aspects of the contract such as repairs. Anything that affects the originally agreed upon terms of the purchase and sales agreement can be added once both parties agree to the updates.