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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Meet some of our Purchase and Sale Agreement Lawyers
Darryl S.
Darryl S.
I offer flat/fixed fees rather than hourly work to help lower your legal costs and align our interests. I specialize in contract law and focus on making sure your contract is clear, protects your interests and meets your needs. You can expect fast, straightforward communication from me, making sure you understand every step. With my experience, you'll get a detailed review of your contract at a fair, fixed price, without any surprises. I have over 30 years of business and legal experience that I bring to your project. I graduated from The University of Texas School of Law with High Honors in 1993 and practiced at Texas' largest law firm. I have founded companies and so understand how to be helpful as both a lawyer and business owner.
"Had a great experience working with Darryl. He was thoughtful, direct, responsive, and most importantly able to quickly understand a complex business and regulatory structure without overcomplicating things. Really appreciated his practical approach and ability to explain things clearly. Highly recommend."
Angela Y.
NJ and NY corporate contract lawyer and founder of a firm specializing in helping entrepreneurs. With a background in law firms, technology, and world class corporate departments, I've handled contracts and negotiations for everything from commercial leases and one-off sales agreements, to multi-million dollar asset sales. I love taking a customer-focused and business-minded approach to helping my clients achieve their goals. Other information: learning to surf, lover of travel, and one-time marathoner (NYC 2018) yulawlegal.com
"Angela is simply phenomenal. Nothing else to say; if she bids on your project, hire her!"
Jonathan G.
Small Business Attorney licensed in Texas and Colorado. Based in Dallas, appointments available in DFW area.
"I've enjoyed working with Jonathan and will continue to work with him after this initial step is complete"
Jason H.
Jason has been providing legal insight and business expertise since 2001. He is admitted to both the Virginia Bar and the Texas State Bar, and also proud of his membership to the Fellowship of Ministers and Churches. Having served many people, companies and organizations with legal and business needs, his peers and clients know him to be a high-performing and skilled attorney who genuinely cares about his clients. In addition to being a trusted legal advisor, he is a keen business advisor for executive leadership and senior leadership teams on corporate legal and regulatory matters. His personal mission is to take a genuine interest in his clients, and serve as a primary resource to them.
"Wonderful attorney! He was extremely professional, answered all of my questions and was patient with my complicated legal situation. Don’t hesitate to hire him."
Keidi C.
Keidi S. Carrington brings a wealth of legal knowledge and business experience in the financial services area with a particular focus on investment management. She is a former securities examiner at the United States Securities & Exchange Commission (SEC) and Associate Counsel at State Street Bank & Trust and has consulted for various investment houses and private investment entities. Her work has included developing a mutual fund that invested in equity securities of listed real estate investment trusts (REITs) and other listed real estate companies; establishing private equity and hedge funds that help clients raise capital by preparing offering materials, negotiating with prospective investors, preparing partnership and LLC operating agreements and advising on and documenting management arrangements; advising on the establishment of Initial Coin Offerings (ICOs/Token Offerings) and counseling SEC registered and state investment advisers regarding organizational structure and compliance. Ms. Carrington is a graduate of Johns Hopkins University with a B.A. in International Relations. She earned her Juris Doctorate from New England Law | Boston and her LL.M. in Banking and Financial Law from Boston University School of Law. She is admitted to practice in Massachusetts and New York. Currently, her practice focuses on assisting investors, start-ups, small and mid-size businesses with their legal needs in the areas of corporate and securities law.
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Casey B.
I have a Juris Doctorate degree from Mercer Law School, and I am an active member of the Georgia State Bar Association. I have spent the last eight years reviewing, drafting, editing, and negotiating hundreds of contracts on a monthly basis, working in-house for a Fortune 500 company. I am a results-driven, self-motivated, experienced contracts attorney with exceptional drafting, research and communication abilities.
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Kchris G.
My name is Kchris Griffin. I am an licensed attorney practicing Family and Civil Law in Oklahoma. My goal is to help those in need with receiving efficient and effective legal services.
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Real Estate
Purchase and Sale Agreement
California
Purchase and sale agreement contingencies?
I am in the process of purchasing a home and have received a Purchase and Sale Agreement from the seller. I understand that there are contingencies that must be met in order for the agreement to be valid, but I am unclear on what these contingencies are and how they will affect the agreement. I am hoping to get some insight from a lawyer on what contingencies I should be aware of and how they could affect the agreement.
Myrna L.
Contingencies are conditions provided in the contract that need to be met prior to performance or close of escrow. In Purchase and Sale Agreements, it is usually the buyer who negotiates for contingencies to reduce or eliminate their risks prior to close of escrow. Normally, buyer’s contingencies would include appraisal reports, property inspections, mortgages, title reports or sale of another property. More often than not, sellers do not have contingencies in Purchase and Sale Agreements because they want to sell the property in a timely manner; if seller cannot deliver the property, it may deem the property not available for sale in the first place.
Real Estate
Purchase and Sale Agreement
Texas
Does Texas have any specific real estate rules?
I am moving from California and wanted to see if there is anything I should know.
George O.
Like any state, Texas does have rules specific to transactions occurring within its state lines. For example, the Texas Property Code governs most real estate matters, along with Landlord/Tenant matters. However realtors and transactions of that nature are governed by the Texas Occupations Code, which seems odd, but that is how it is.
Real Estate
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
California
When to sign a purchase and sale agreement?
I am in the process of purchasing a property and need to know when I should sign the purchase and sale agreement. I have been given an offer from the seller and have been told that I need to sign the agreement in order to move forward with the purchase. I am concerned about signing the agreement too soon and have questions about the timing and what risks I may be taking if I sign before I am sure I am ready.
Myrna L.
If you are not ready to buy a property, it is only fair not to waste sellers’ time who are trying to sell their property. If, however, you are ready to buy a property but is concerned about unforeseeable risks, you can mitigate or eliminate your risks by spelling out contingencies in your Purchase and Sales Agreement. If the conditions or contingencies are not met, you do not have to go through with the deal.
Representations and Warranties
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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