Purchase and Sales Agreement: Everything You Need to Know
A purchase and sales agreement differs from bills of sale as it's used for advanced sales transactions, such as those involving business assets or real estate.3 min read
A purchase and sales agreement is used for advanced sales transactions, such as those involving business assets or real estate. They're different from bills of sale, as certain conditions must be met before the sale is finalized. Purchase and sales agreements can be called different names, depending on the transaction and which state it takes place in. They're all in-depth contracts that define the terms and conditions of a financial purpose.
What is a Sales and Purchase Agreement?
There is detailed buyer and seller information in purchase and sales agreements, including names, phone numbers, addresses, and co-signers if applicable. The agreement also lists the following:
- Type of sale.
- Dates of the agreement.
- If a deposit was paid.
- Dates when the rest of the contract will be complete.
- Date of contract's final closing and ownership transfer.
These agreements are often considered "living" since they're subject to revisions often. Detailed property descriptions are also included, including any defects or deficits that are known when the agreement is created. There may be language in the agreement that lets the buyer hire professionals to inspect the property if they wish. Further language can state that if the expectations aren't met by the buyer after the inspection or there are defects found that weren't expressed by the seller, the buyer can end the contract.
What Buyers and Sellers Should Know
There are times when many forms and paperwork will need to be filled out, such as when buying a home. One of the essential documents signed by sellers and buyers is the purchase and sales agreement, also known as the purchase agreement. The agreement defines the terms and conditions of buying the home and sets the transaction's timeline. Both sellers and buyers should read this document carefully so they understand what the terms are before they sign it. The closing date and purchase price are included in the agreement, which are crucial items in a real estate purchase.
How much money the buyer puts down for the deposit is also known as the earnest money. The rules of this are laid out in the agreement, and this money should be put in an escrow account until settlement occurs. The parties in the transaction may want to include items that come with the purchase of the house, such as window treatments and appliances. Items that aren't expressed, such as a washer and dryer, can also be stated by the person selling the property.
The contingencies of and commitment to the home purchase should also be stated by the seller. There are certain contingencies that can be stipulated to release the buyer from purchasing the home and allowing the deposit to be returned. For example, if the buyer's current home doesn't sell, he doesn't have to purchase the new home.
There is also a mortgage contingency clause for cases where buyers are not able to finish a home purchase until they are approved for a mortgage. This means buying the home is contingent on loan approval. The home must also be appraised at a specific value in order for a person to qualify for a mortgage.
Items Included in the Purchase and Sale Agreement
Certain items in the contract depend on the state, but there are some items they all have in common. The final sales price is the purchase price that is agreed upon by the seller and buyer. This may change somewhat during negotiations prior to the final closing date. For example, if there ends up being an issue with the home inspection, the buyer can try to negotiate a lower purchase price.
The agreement will also have details on the earnest money deposit, including instructions and the dollar amount for making the deposit. The buyer will often be required to deposit a cashier's check or personal check within a few days of both parties agreeing. This will be held until the deal is completed by a neutral third party. On the closing date, the purchase is completed and the property transfer is recorded with the government. The seller will then be paid for the home. All the paperwork will be signed a few days before the closing date.
If you need help with a purchase and sales agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.