What is a purchase and sale agreement?
A basic form that purchasers and sellers fill out as part of a real estate transaction is the purchase and sale agreement, or P&S or PSA. After a buyer and seller agree on a home’s purchase price, it is often drafted by the seller’s agent or a real estate lawyer.
This document, as its name implies, serves as a preliminary agreement to buy a house and contains important information about the real estate transaction. Even though a house is frequently described as being “in contract” once the PSA is signed, the sale of the house is by no means finished or concluded because this document is not the same as a final contract.
Purchase cost
The P&S agreement will include the home purchase price that the buyer and seller have agreed upon.
Deposit money
Deposits made as earnest money, also known as good faith deposits, are specified. These serve as the buyer’s security deposit to the seller prior to a house purchase.
Included or excluded
The P&S will state if the seller intends to leave specific items or equipment, such as the washer and dryer, to the buyer as part of the property sale. Also specified will be whether they intend to take any fixtures with them.
Contingencies
Actions that must be completed by the buyer or seller before the home sale can proceed are known as contingencies. The buyer or seller may cancel the agreement if these conditions are not met. For instance, purchasers frequently stipulate in their purchase agreements that a satisfactory home inspection must be completed or that they must first sell their own home before making a purchase. The seller may specify that they are doing no repairs and are selling the house “as-is.” Alternatively, they might reserve the right to keep displaying the house.
Closing expenses
Any fees connected to the acquisition and sale of a home that the buyer or seller will pay at closing are typically included in closing costs. Although closing expenses are frequently the duty of the buyer, a seller could offer to cover some or all of them as an inducement for a buyer to acquire their home. Often, the PSA will specify who is responsible for what costs.
The deadline
The day the final paperwork is signed by both the buyer and the seller and money is exchanged is known as the closing date.
Warranty
The terms of any house warranties will be specified on the purchase and selling agreement if they are part of the deal.
What does a purchase and sell agreement not cover?
The terms of the real estate transaction are described in the purchase and sale agreement, although they are frequently left out. For instance, on a P&S, you won’t find a breakdown of all the real closing expenses, just an estimated sum of the significant ones. The closing statement you receive later on in the house buying process, usually three business days before the closing day, will provide the whole breakdown.
How enforceable is a purchase and sale contract?
Before you finalize a purchase and sale, it’s critical to understand that, despite the innocent-sounding word “agreement,” a P&S is actually an official contract, a signed statement that Party A would sell the property to Party B. According to Michaela Green, a certified real estate agent and member of the Houston Association of Realtors, “It may not complete a sale, but it is legally binding. “The other party has the right to pursue legal action if either the buyer or the seller fails to abide by the terms of the contract.”
However, if your P&S specifies any conditions, such conditions must be satisfied before the sale or purchase of your home can proceed. Both the buyer and the seller have the right to terminate the agreement if these conditions are not met.
For instance, a buyer may be entitled to back out of the deal if the home inspection reveals a number of expensive and significant issues with the property that the seller is unable or unable to address. Or, if the buyer cannot secure finance by a specific date, the seller may declare the agreement dead and consider other offers. Everything depends on the stipulations that have been agreed upon by the buyer and seller. What happens to the earnest money is sometimes stated out in the P&S as well.
Purchase agreements versus purchase and sale agreements
Despite having names that are similar, the buy and sell agreement and purchase agreement have different objectives. The P&S, which expresses desire to transfer property, is created early in the home-buying process. The official contract for buying or selling a property is the purchase agreement, which is often signed during closing. The P&S serves as a preliminary statement, and the purchase agreement, which is signed on closing day, completes the deal. It may contain many of the same details as the P&S, but it does so as a completed transaction rather than an intent to acquire.
Nevertheless, the buy and sale agreement is occasionally referred to as a “purchase agreement” for short, which is a confusing but common slang term.
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