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Purchase And Sale Agreement

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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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.


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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:

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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Contract, E-Commerce Attorney & Dispute Resolution Specialists
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I am a licensed and active NY and CT Contracts Attorney, with over 20 years of diverse legal and business experience. I specialize in reviewing, drafting and negotiating commercial agreements. My practice focuses on working with small business clients as well as clients from international brokerage firms on acquisitions, especially in the Ecommerce space; drafting, negotiating, reviewing and advising on business agreements; ; breach of contract issues, contract disputes and arbitration. I am licensed to practice in New York and Connecticut, and am a FINRA and NCDS Arbitrator. My experience includes serving as General Counsel to small businesses. This entails reviewing, updating and drafting contracts such as employments agreements, asset purchase agreements, master services agreements, operating agreements and a variety of business and commercial contracts. Additionally, I assist clients with business strategies, contract disputes and arbitration. My diverse experience allows me to give my clients a well-rounded approach to the issues they face. I have been at top AML law firms; a Vice President at an Investment Bank, a Civil Court Arbitrator presiding over cases in contract law, commercial law, a Hearing Officer, presiding over cases and rendering written decisions, and a Judicial Clerk to a Civil Court Judge. It would be a privilege to assist you and your business with my services.

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Real Estate

Purchase And Sale Agreement

Washington

Asked on Sep 9, 2023

Earnest money in a purchase and sale agreement?

I am in the process of buying a house and have been presented with a purchase and sale agreement. I am confused about the earnest money portion of the agreement and would like to understand what it means and how it will affect the transaction. I am particularly interested in knowing what happens to the earnest money if either party decides to back out of the agreement.

Merry A.

Answered Sep 12, 2023

Good morning. I am a WA State attorney, and I have reviewed numerous purchase and sale agreements (PSA), and have bought and sold numerous pieces of property in WA and CO. You are wise to ask this question. Since you are the buyer, normally your buyer's real estate agent would prepare the PSA for you to use, after discussing with you. Since you said a PSA "was presented to you" I"m wondering whether you are buying a new home from a building contractor. In any event, the purpose to an earnest money payment is to hold the home for you and let the seller know you are interested. In most cases, however, the seller can keep your whole earnest money payment if you back out of a purchase for reasons that are not protected in the PSA. For example, if you write your offer contingent on your subjective approval of an inspection report, or write your offer contingent on obtaining financing at terms you approve of, either one of these terms can get you out of the contract and also have your earnest money returned to you. There should be language in the PSA that clearly states what happens to the earnest money and how much earnest money you are providing. I hope that that is helpful. If you continue to have questions, I urge you to have an attorney review any and all documents, including those for loans, prior to signing anything.

Read 1 attorney answer>

Real Estate

Purchase And Sale Agreement

Texas

Asked on Sep 8, 2023

Purchase and sale agreement and appraisals?

I recently entered into a Purchase and Sale Agreement for a property I am interested in buying. I understand that appraisals are generally required for a Purchase and Sale Agreement, but I am unsure of how they are conducted and what the process for obtaining an appraisal is. I am looking to better understand the appraisal process in respect to a Purchase and Sale Agreement.

Michael A.

Answered Oct 17, 2023

An appraisal is merely a professional opinion of value. In regards to a purchase and sale agreement, lenders usually require a 3rd party professional opinion of value of the property being purchased.

Read 1 attorney answer>

Business Contracts

Purchase And Sale Agreement

Washington

Asked on Sep 9, 2023

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 A.

Answered Sep 12, 2023

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.

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Real Estate

Purchase And Sale Agreement

Massachusetts

Asked on Sep 7, 2023

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.

Answered Sep 22, 2023

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.

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Real Estate

Purchase And Sale Agreement

North Carolina

Asked on Sep 6, 2023

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.

Answered Oct 17, 2023

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.

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