Purchase And Sale Agreement In Real Estate
Sellers have to go through many stages to get their property sold, but the most sensitive part may just be the real estate purchase and sale agreement. Signing this contract is one of the last steps, so you need to pay close attention to the buyer’s requests and work closely with your agent to get the best possible outcome.
With the above in mind, you need to understand how a real estate purchase and sale agreement works as this can help you save money while keeping the buyer happy.
Below, we’ll go over the definition of a real estate purchase agreement and highlight the conditions that should be included in this contract. We’ll also tell you who needs a purchase and sale contract and share some of the common terms you’ll find in this type of agreement.
What is a Purchase And Sale Agreement in Real Estate?
First, let’s start by defining a sale and purchase agreement for a house.
Simply put, a sale and purchase agreement is a binding contract that dictates the terms and conditions of the sale of a real estate property. Besides detailing the specific purchase price and deposit amount, purchase agreements include basic information. This includes the property condition, closing arrangements, requests that the buyer makes, and the conditions that the seller agrees to.
Who Needs a Sale And Purchase Agreement In Real Estate?
A purchase agreement is a binding document that’s required every time a piece of real estate property is sold. It doesn’t matter if you’re selling or buying, you’ll need to set up an agreement with the other party to ensure that the sale of the property occurs while following certain pre-set conditions.
There are two different paths you can go when selling your home, which are working with an agent and managing your property sale independently.
When Represented by a Real Estate Agent
If you’re working with a real estate agent you don’t have to worry about the agreement. Your real estate agent is usually responsible for creating the draft and arranging a signing date with the buyer. Since agents don’t have the ability to give legal advice, the contract is usually drafted by one of the firm’s lawyers and then transferred to the real estate representative.
When Selling Independently
Sellers who work independently are directly responsible for drafting the contract and setting a signing date. As a part of this, you need to ensure that your contract meets all legal requirements and that it’s valid to local, stage, and national authorities. At the same time, you’ll also be responsible for negotiating all terms and conditions that the buyer may want to include or remove.
Conditions You Must Have in a Sale And Purchase Agreement In Real Estate
Before going over common conditions and clauses that you should include in your agreement, it’s important to note that you have to include a short list of basic details.
For starters, you need to provide buyer and seller details. In case there are multiple sellers and/or buyers, you need to provide the information of all stakeholders.
You also have to pay attention to the details you have to disclose according to the governing law, which changes based on your location.
Finally, it should describe the details of the real estate transaction itself, including the earnest money deposit amount and escrow agent.
Other common purchase and sales agreement real estate conditions that you need to have in your contract include:
Financing Terms and Conditions
One of the standard clauses that your purchase contract should include is the financial terms and conditions of your purchase.
While the earnest money amount is crucial, it’s far from the only financial condition you need to include. Not all buyers are stable enough to make a cash offer. This means that your buyer will likely want to make the home purchase contingent on obtaining financing at a certain interest rate.
You can also discuss the financial conditions you want to with your agent and this professional will help ensure that your terms are included.
The Person Responsible for the Closing Costs
This can vary from one market to the next, but in most cases, buyers tend to cover the bulk of the closing costs. That said, your buyer may request that you help pay or fully cover all closing costs and if you accept this request it needs to be detailed in the purchase agreement.
Some buyers may also ask you to cover very specific costs associated with the transaction, like escrow fees and title insurance, so talk to your real estate agent to know which conditions you should agree to.
Home Inspection Details
Out of all the standard clauses that your buyer will request, a home inspection contingency is likely the most common one. In simple terms, this condition allows buyers to forfeit the entire agreement if the home inspection reveals a certain type of damage or flaw in the property.
You’ll have to hire a home inspector as part of the valuation process, so your best bet is to be transparent and make sure that your agent knows about things that could potentially trigger this clause.
The Specific Belongings Included in the Sale
If you show your home to potential buyers with your personal property still in it, the buyer may request that the house is sold with all of its contents. Real estate agents can advise you on how to handle this situation, especially if you have new appliances or fixtures you’re not willing to part with.
Whatever the case may be, make sure that the purchase agreement includes a legal description of all of the elements that will be left in the house, as well as the belongings that will be removed, in your contract.
Your residential property sale contract should also include a closing date by which the sale agreement must be completed. Real estate transactions can take some time, especially if they are contingent on mortgage loans and home sales. However, this condition always aims to assess all conditions and set an exact date by which the deal should be closed.
Keep in mind that the closing date is different from the requisition date or title search date, which set the limit that the seller has to sort out any issues with the property title.
Important Terms in a Real Estate Sale & Purchase Contract
There’s a strong chance you’ll encounter terms you don’t know in your real estate purchase contract. We’ve put together a glossary of terms to help you understand your agreement and get the most value from it.
Contingencies can be described as the conditions that both buyers and sellers have to meet for the transaction to go through successfully. Common contingencies include home inspections, appraisals, financing, and title-related conditions.
Representation and Warranties
Representation and warranties refer to the parts of the contract verifying that all the statements you’re making as the legitimate homeowner are true. This gives buyers assurance because they’re making a major purchase that can take years to pay off.
The purchase price is the dollar amount that buyers have to pay in order to acquire the residential property being sold.
The property details include all of the characteristics of the property, including its address, full description, and all other necessary pieces of information.
Dispute Resolution Clause
Even though all parties wish for a smooth home sale, this isn’t always the case. The dispute resolution clause can help you determine how to manage these situations before they arise in order to sort them out quickly and efficiently.
The signing of the purchase contract is a defining moment in the sale of a real estate property. It’s crucial to understand its purchase as well as all of the terms that you’ll likely encounter in this type of arrangement.
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