Purchase and Sale Agreement: A Basic Guide
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What Is a Purchase and Sale Agreement?
A purchase and sale agreement, also known as a purchase and sale contract, P&S agreement, or PSA, is a legally-binding document that establishes the terms and conditions related to a real estate transaction. It defines what requirements the buyer must meet as well as purchase price, limitations, and contingencies. Real estate lawyers generally write them for the buyer and seller to sign. In some jurisdictions, purchase and sale agreements can also be prepared by a real estate agent or broker.
How A Purchase And Sale Agreement Works
A purchase and sale agreement is different from a purchase agreement in one particular way. Rather than complete the transaction, as a purchase agreement would, a purchase and sale agreement will instead facilitate it while providing clear guidance regarding party responsibility. By signing the contract, you do not agree to buy or sell the house.
Instead, you are determining how to handle:
- Title searches and transferability
- Inspections and negotiations
- Financing and loan documents
- Transfer of money
- Closing and associated costs
There may even be a negotiation period when it comes to finalizing the terms and conditions of the purchase and sale agreement. This document is critical since it serves as the basis for the property’s sale and can also demonstrate the seriousness and willingness of both parties by signing it since there are typically cancellation penalties.
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After The P&S Agreement Is Signed
Since real estate purchases are more complicated than other purchases, it can take several weeks to finalize. During that period, the buyer, seller, and other third-parties will engage in a series of activities that complete the sale.
Here is what may occur after the purchase and sale agreement is signed:
- Title search: Your property lawyers can file for transfer of ownership while under contract. A title search ensures that the owner has the legal right to sell the residence.
- Inspections: After signing the contract, the purchaser will inspect the property’s condition. The buyer may also renegotiate the purchase and sale agreement if repairs need to be made to reach a satisfactory level.
- Loan agreement: Although most buyers are pre-approved for financing, the process continues to move forward by formally signing a final loan agreement. This process may include an appraiser inspection, underwriting inspection, and more before completion.
- Money transfer: Before closing, the buyer must have the money ready for transfer by agreeing to a down payment, cash payment in full, or an escrow deposit. The seller will not release a deed until receiving the buyer’s payment.
- Closing: Finally, closing involves the signing of documents that are necessary to transfer property ownership. Other activities may be applied as required to satisfy the needs of the purchase and sale agreement.
Once completing these five steps, the buyer will typically receive the keys to take ownership of the property. This purchase or sale is likely the biggest one you will make in your lifetime, which means that you should have a solid purchase and sale agreement in place to ensure that everything goes as expected and you have a serious commitment from the buyer or seller.
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What’s Included In A Purchase And Sale Agreement
Since the purchase and sale agreement is the master document that establishes your purchase or sale terms, it should contain the necessary sections, provisions, and elements.
Below, check out some of the elements included in a purchase and sale agreement:
- Amount of the deposit and handling of cancellations
- Personal property included in the transaction
- Escrow and occupancy dates and handling of cancellations
- Contract default provisions if one or both parties do not meet the agreement
- Property inspection terms and conditions
- Financing arrangements and stipulations for payment of closing costs
- Contingencies for the sale or purchase of a new or old residence and insurance, including a rental lease agreement or forbearance agreement
- Other covenants, limitations, and conditions as necessary
As you can see, there are numerous facts and considerations that both parties must make when buying and selling a home. Depending upon where you live and other particulars, you may need to add local or state-specific provisions for the contract to oversee a lawful transaction. Ensure that you draft a contract that is right for the type of purchase and sale agreements related to real estate.
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Types Of Purchase And Sale Agreements
Since the types of purchase and sale agreements vary widely, make sure that you understand the difference between the purchase and sale agreement for a house versus a purchase and sale agreement for a car. While the primary components of a contract largely remain the same across all documents, there are always vital differences that you will notice.
Purchase And Sale Agreement For House
A purchase and sale agreement for a house addresses the specific needs and provisions surrounding the transaction. It will consider escrow, closing, expectations, and use real estate terminology that you will not find in another other type of purchase and sale agreement.
Purchase And Sale Agreement For Car
When buying or selling a car, a purchase and sale agreement will describe all matters related to ownership transfer. They tend to be shorter and with fewer terms and conditions. However, they do contain some shared components, including payment, inspection, and transferability.
Samples Of Purchase And Sale Agreements
There are samples of purchase and sale agreements available online. Reviewing them will give you a good sense of what is expected during the process and the type of agreement you are making. Find a purchase and sale agreement used for your exact situation to make the picture even more transparent.
Here are a few samples of purchase and sale agreements:
- Law Depot purchase and sale agreement sample
- SEC purchase and sale agreement sample
- Eforms purchase and sale agreement sample
If you are considering using an online template to create your contract, determine if the transaction you are facilitating is right for the document you need. Due to both parties’ expectations of the sale, consider working with a lawyer to draft a purchase and sale agreement for you.
Working With A Lawyer To Draft A Purchase And Sale Agreement
Problems during a real estate transaction cost both the buyer and seller time, resources, and money. As such, it is imperative that you have a purchase and sale agreement in place that fosters and facilitates the transfer of a home from a seller to a buyer. Contracts carry specific legal implications, which means that you should hire property lawyers to write them instead of using contract templates.
A lawyer will take the time to understand your specific situation and needs to ensure that the agreement is personalized for your objectives. He or she will also guarantee that it complies with all applicable laws in your jurisdiction.
You will have additional peace-of-mind and reassurance knowing that a legal professional created your agreement versus making guesses with templates online. Do not leave the most significant sale or purchase of your lifetime to chances. Protect yourself by working with a lawyer to draft a purchase and sale agreement.
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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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Meet some of our Purchase and Sale Agreement Lawyers
Lori B.
With over 30 years of legal experience, I can assist your legal needs -promptly and professionally. I am a business, contract and real estate lawyer with extensive experience in company formation, sale of businesses, business purchase and sale transactions, commercial and residential leases, employment and the sale of real property. I also have 30 years of experience in family law matters.
"Lori was very thorough and helped put my mind at ease. She pointed out a few items to make the contract stronger. Great to work with."
Christopher M.
I am a corporate attorney with several years of experience with contracts, corporate and business, government projects, and employment law.
"Chris helped us put together a quick SaaS contract. HE is very nice and professional."
Lawrence S.
Lawrence A. “Larry” Saichek is an AV rated attorney and a CPA focusing on business and real estate transactions, corporate law and alternative dispute resolution. With a background including five years of public accounting and six years as “in house” counsel to a national real estate investment company, Larry brings a unique perspective to his clients – as attorney, accountant and businessman. Many clients think of Larry as their outside “in house” counsel and a valued member of their team. Larry is also a Florida Supreme Court Certified Mediator and a qualified arbitrator with over 25 years of ADR experience.
"High recommend. Lawrence is very detailed and responsive. Will use again"
Terence B.
Terry Brennan is an experienced corporate, intellectual property and emerging company transactions attorney who has been a partner at two national Wall Street law firms and a trusted corporate counsel. He focuses on providing practical, cost-efficient and creative legal advice to entrepreneurs, established enterprises and investors for business, corporate finance, intellectual property and technology transactions. As a partner at prominent law firms, Terry's work centered around financing, mergers and acquisitions, joint ventures, securities transactions, outsourcing and structuring of business entities to protect, license, finance and commercialize technology, manufacturing, digital media, intellectual property, entertainment and financial assets. As the General Counsel of IBAX Healthcare Systems, Terry was responsible for all legal and related business matters including health information systems licensing agreements, merger and acquisitions, product development and regulatory issues, contract administr
"Working with Terence was quick and easy, we would highly recommend him."
Alton H.
Alton H.
I am a U.S.-licensed attorney with more than a decade of experience in complex litigation and intellectual property matters. I have practiced at leading Am Law firms including Pillsbury Winthrop Shaw Pittman, Arent Fox, and Sughrue Mion, and I currently operate my own law practice. I have extensive experience handling high-stakes patent litigation, drafting pleadings and briefs, managing large-scale discovery, preparing and defending depositions, and appearing before federal courts and administrative bodies such as the PTAB and ITC. I hold a J.D., cum laude, from The George Washington University Law School and advanced technical degrees in chemistry and chemical engineering, which allow me to efficiently handle technically complex matters. I am admitted in multiple jurisdictions, including New York, Virginia, New Jersey, and the District of Columbia, and I regularly provide high-quality remote legal support to clients nationwide.
"Alton was responsive, thorough, and clear. He reviewed a consulting agreement against my prior employer’s restrictive covenants under two states’ law, delivered a practical risk memo and a redline I could send as is, and caught an issue I hadn’t asked about. Flat fee, on time, no surprises."
April 15, 2021
Samantha B.
Samantha has focused her career on developing and implementing customized compliance programs for SEC, CFTC, and FINRA regulated organizations. She has worked with over 100 investment advisers, alternative asset managers (private equity funds, hedge funds, real estate funds, venture capital funds, etc.), and broker-dealers, with assets under management ranging from several hundred million to several billion dollars. Samantha has held roles such as Chief Compliance Officer and Interim Chief Compliance Officer for SEC-registered investment advisory firms, “Of Counsel” for law firms, and has worked for various securities compliance consulting firms. Samantha founded Coast to Coast Compliance to make a meaningful impact on clients’ businesses overall, by enhancing or otherwise creating an exceptional and customized compliance program and cultivating a strong culture of compliance. Coast to Coast Compliance provides proactive, comprehensive, and independent compliance solutions, focusing primarily on project-based deliverables and various ongoing compliance pain points for investment advisers, broker-dealers, and other financial services firms.
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Purchase and Sale Agreement
California
Property condition in a purchase and sale agreement?
I am in the process of buying a house and am in the process of signing a Purchase and Sale Agreement. I have a question regarding the property condition stated in the agreement and would like to understand what my rights and responsibilities are in regards to the property condition. I am primarily concerned with any potential liabilities I may have if the property is not in the condition specified in the agreement.
Myrna L.
First, have a professional contractor inspect the property and provide you a report on the condition, i.e. roof, plumbing, electrical, sewer, etc. Contractor should look for defects, both latent and visible defects. Second, compare contractor’s report with the stated condition of the property in the proposed Purchase Sale Agreement. Third, if contractor finds defects, negotiate with seller on the costs of repairs of defects , either through a reduction in purchase price of property or hold money to repair defects in escrow.
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Purchase and Sale Agreement
Massachusetts
Purchase and sale agreement and closing costs?
I am in the process of purchasing a home and I am looking at signing a Purchase and Sale Agreement. I am trying to understand what closing costs I will need to pay in order to complete the transaction. I want to make sure I am aware of all the costs associated with this purchase so that I can plan accordingly.
Moss S.
In Massachusetts it is advisable to have an attorney represent you in negotiating a Purchase and Sale Agreement. Purchasing a home is usually the most expensive item that a person buys in their lifetime. Regarding closing costs, they are driven mostly by your lender.
Real Estate
Purchase and Sale Agreement
North Carolina
Title issues in a purchase and sale agreement?
I am in the process of buying a piece of property, and I am currently in the middle of negotiating the purchase and sale agreement. I am concerned about potential title issues that may arise due to the history of the property, as I am not sure if the seller has clear title to the property. I would like to know what I should look out for in the agreement to ensure that I am protected from any potential title issues.
N'kia N.
A typical purchase and sale agreement for real property (commonly called an "Offer to Purchase and Contract" in North Carolina) includes due diligence. Due diligence is the buyer's opportunity to investigate the property. During the due diligence period, the buyer will usually have the property inspected. However, the buyer may also conduct a title search on the property. Additionally, a purchase and sale agreement might specify that the deal is contingent upon the seller being able to deliver clear title to the property. Anyone who is considering entering into a purchase and sale agreement for real property should also consider at least having an attorney review the agreement. It probably would not hurt to have attorney representation throughout the transaction.
Business Contracts
Purchase and Sale Agreement
Washington
Governing law in a purchase and sale agreement?
I am in the process of purchasing a business and have been presented with a Purchase and Sale Agreement. I am looking to better understand the governing law that would be applicable to this agreement, and any potential implications for the agreement. I am looking for advice on the law that would be applicable to this Purchase and Sale Agreement, and the potential implications for the agreement.
Merry K.
Good morning - I am a WA State attorney. The purchase and sale agreement should, itself, specify the governing law that would be applicable; if that term is not already part of the PSA you were presented, it should be added. If you are buying a business in WA, normally the PSA will say that WA law will apply, but if you are buying a franchise, it's possible that the PSA will say something like that law of Delaware may apply. Washington has good governing law for this type of agreement. I also suggest that you discuss any concerns with your buyer's agent, and possibly request a WA State attorney to review all the documents before you sign anything.
Real Estate
Purchase and Sale Agreement
Texas
Does a wholesaler need to be at closing?
As a wholesale from another state trying to execute a purchase and sale agreement on a property, do i need to be physically present in that state to complete this process. For example, i live in Texas. The property is in California. How do i conduct a purchase and sale agreement with a seller or their real estate agent. I live in Texas. I am trying to execute a purchase and sale agreement with a seller or their real estate agent who live in California.
Rebecca S.
The short answer is you can be an out of state purchaser but you need to right support team behind you. Signing the contract can be done electronically and you don’t need to be in California to do that. Either a real estate attorney or hiring your own agent.
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