As anyone who has been involved in a home sale can attest, the mountains of paperwork involved in such a transaction can feel overwhelming. No document in the sales process is as important as the purchase and sale agreement, however. Both sides need to understand this agreement completely before signing; with that in mind, here are four important points to be aware of before putting pen to paper.
The purpose of a purchase and sale agreement is to document the transaction terms as agreed upon by the buyer and seller.
Essentially, the purchase and sale agreement spells out all the details of the transaction so that both parties share the same understanding. Terms typically included in this agreement include the purchase price, the closing date, the amount of earnest money that the buyer must submit as a deposit and the list of items that are and are not included in the sale (such as appliances).
The purchase and sale agreement also defines any necessary contingencies on the buyer’s part.
Sometimes a buyer’s ability to go through with a purchase depends upon external factors, such as mortgage approval, the sale of the buyer’s current home or an appraisal of the new home that meets their lender’s criteria. The buyer will often want to make their commitment to purchase contingent on the satisfaction of these external factors. On their part, the seller may wish continue the marketing process during this contingency period, with the buyer sometimes asking for the right to meet the terms of any other offers. All of these various issues are written into the purchase and sale agreement.
The home inspection process is also outlined in the purchase and sale agreement.
The home inspection is an important step in the closing of a home sale, and the details of this procedure are outlined in the purchase and sale agreement. Whether or not the home is offered for sale as-is (which should be specified in the agreement), the buyer is typically given the opportunity to inspect within a certain time frame.
While standard purchase and sale forms exist, these templates don’t always match a particular buyer and seller’s needs.
Almost every home sale is a complex transaction with its own set of unique legal requirements; few buyers and sellers are satisfied with accepting the form guidelines without any modifications. For this reason, the terms and language almost always need to be adjusted if you choose to use a form purchase and sale agreement.
Because a home purchase reflects a significant investment of money and time for both the buyer and seller, a failed or inadequate purchase and sale agreement can cost both parties dearly. For this reason, both parties can benefit from a consultation with a qualified real estate attorney before signing any modified form agreement.