What Is the Purchase and Sale Agreement?When it comes to buying a home, once you get to the purchase and sale agreement, you're almost there. Your feet feel like they've walked through every house in town and you have finally found one that fits your budget and contains most of your must-haves. It is time to make an offer, a process that deserves careful consideration and comes with some legal strings attached.
When you make an offer in writing, you need to decide what price you want to offer for the home, whether your offer will be contingent upon anything (such as a home inspection), and what deadline you want to set for a response. Your offer is always accompanied by a binder payment—also known as earnest money—which is usually in the form of a check for $1,000 or so.
Read the purchase contract carefully before signing it, as this is a contract that is binding in court. If you don't like some of the terms or want to be sure that your interests are protected, ask for a copy of the contract and retain an experienced real estate attorney to review it for you.
The seller may decide to accept your offer, reject it, or make a counter-offer. Once you have agreed on terms, it is time to review and sign the formal purchase and sale agreement, which typically contains:
- The approximate closing date
- What property—such as drapes, appliances, and lighting fixtures—is included
- The real estate agent's commission
- The amount of the buyer's deposit and where it will be held—usually in escrow (by a third party)—until the closing
- The amount of the mortgage that the buyer needs to finance purchase of the house
- Inspections that the buyer may want to make, such as a general home inspection and other inspections for radon, termites, etc.
- Cost adjustments to be made at the closing, which can include points, property taxes, etc.
- What happens if either the buyer or seller backs out of the deal
- Any special conditions or contingencies, which could include the seller fixing a problem with the house, the buyer obtaining financing, a satisfactory home inspection report, or other items.
Most buyers breathe easier once the sellers sign the purchase and sale agreement, because the process is formalized and is in motion. However, it isn't uncommon for closing to be delayed due to one issue or another, such as a delay in the mortgage company processing your application or some other snafu. Occasionally, deals do fall apart at the closing conference table. The closing is when ownership of the house passes from the seller to the buyer, so until the closing process is complete, the house isn't yours.
Paying careful attention to the purchase and sale agreement and other details of your purchase can mean the difference between a successful conclusion to your house-hunting journey and putting you back on the streets, starting all over again.