A real estate sales agreement is most typically used to formalize a residential real estate transaction between a buyer and a seller. The purchase agreement will specify the parties’ final negotiations, including the sales price, conditions, and when the closing must occur. Because the deal in most transactions is contingent on the buyer securing financing from a local financial institution, it is recommended that the seller not agree to any sales contract unless the buyer is preapproved or prequalified for the loan.
What Is A Purchase And Sale Agreement In Real Estate?
A purchase and sale agreement, or PSA, is a written and signed document created after a buyer and seller mutually agree on the price and terms of a real estate transaction. Depending on state rules, the PSA will be prepared by a real estate agent or attorney.
The PSA specifies the amount of earnest money required, the closing date, and the precise contingencies agreed to by the buyer and seller. The PSA is the document in which the seller and buyer agree on the purchase terms and set the transaction toward closure.
Purchase Agreement vs. PSA
A purchase agreement is not the same as a PSA. PSAs specify the transaction’s parameters and include the closing date and other data. The signing of a PSA does not complete the sale of the home.
On the other hand, signing a purchase agreement completes the home transaction. Whereas the PSA lays out the terms of the marketing leading up to the closing date, the purchase agreement is what you sign to finalize the transaction.
What Are Real Estate Sales Agreement Contingencies?
A contingency is a condition that must be met and depends on certain real-world events. An agreement of purchase with conditions in real estate specifies that, while an offer has been made and accepted on a property, specific additional requirements must be met before the deal is finalized.
When purchasing or selling a home, you may meet the following contingencies:
- Inspection contingency: Allows a buyer to back out of a house purchase agreement if a future home inspection reveals any faults on the property.
- Appraisal contingency: A provision designed to ensure that the appraised value of a home is equal to or greater than the agreed-upon purchase price.
- Financing contingency: A mortgage contingency that protects the buyer and ensures they receive their earnest money deposit if they cannot obtain a mortgage.
- Title contingency: A title report, also known as a chain of title, aims to reassure the buyer that the property is free of liens and other issues.
- Home sale contingency: A type of insurance that states that the buyer’s purchase of the property depends on their ability to sell their current home.
Looking For A Real Estate Purchase Agreement Template
Many templates for generic buy and sale agreements are available online for free. A basic Google search for “purchase and sale agreement for (your state)” yields numerous results. These are useful for getting a sense of what these contracts look like.
Do I Need To Hire A Lawyer To Write The Contract?
A purchase and sale agreement or other contract does not always require the assistance of a lawyer. Many professionals, however, advise having a lawyer draught or review the agreement.
It is always recommended to have (a lawyer), especially if you are not familiar with the legal aspects of buying a property. The risk of not using a lawyer for a purchase and sale agreement is that you overlook essential details or contingencies that may significantly impact the transaction. A lawyer may review the contract and ensure that all of the provisions are fair and lawful and that the transaction is in your best interests.
A real estate sales agreement is a legally binding document that specifies the terms and conditions under which a property will be sold. It’s designed to help you prevent delays by accounting for variables associated with a property purchase and sale. It’s built to safeguard buyers and sellers and ensure a smooth transaction. Understanding the fundamentals of this paper might help you avoid potential mistakes when buying or selling a home.
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FAQ About PSAs
Is it necessary to have a real estate purchase agreement notarized?
No, a real estate purchase agreement does not require notarization to be legitimate.
Is it possible to cancel a real estate contract?
A real estate deal can end if the option is included in the contract or your state’s legislation allows it. State regulations typically enable an agreement to be dissolved if a seller fails to disclose any substantial faults with the property.
Who pays for the purchase agreement?
The costs of drafting this contract are often included in the seller’s agent commission charge, which the seller pays as part of the closing costs.