Purchase and Sales Agreement
August 23, 2018
Buyers and Sellers sign a Purchase and Sales Agreement, or P&S, after an offer has been accepted on a home and a mutual agreement has been reached. A P&S includes the final sale price as well as the terms of the purchase. P&S agreements may look different or include additional items depending on which state the sale takes place in. All Purchase and Sales Agreements include the following key pieces of information:
Final Sale Price
Final sale price is the price agreed on by the buyer and the seller. The price may change during negotiations leading up to the closing date. The buyer may be able to negotiate the final sales price even after signing the P&S due to things uncovered during a home inspection, for example.
Closing Date
This is the date a purchase is scheduled to be completed. On the closing date, transfer of property will be recorded with the local government, and the seller will receive the money for the property. Typically, a buyer will need to sign all necessary paperwork a day or two in advance of the closing, just to be sure everything goes smoothly and there are no surprises.
Earnest Money Details
You may hear the phrase “good faith money” in reference to Earnest Money, as it is a deposit used to show the seller that the buyer is interested in making a good faith agreement. The purchase and sales agreement will include the details of any such document. An Earnest Money deposit will usually be in the form of a check held by a neutral third party until the deal is completed.
Title Insurance Company
The P&S will include information related to the Title Insurance company. Buyers always have the right to choose the title company but in some locations, it may be the customary for the seller to choose. Your agent or title attorney will be able to guide you if you have any questions about choosing a title company.
Contingencies
Contingencies are conditions included on the Purchase and Sales Agreement that the buyer and seller agree must be met in order for the purchase to be completed. If any of these conditions are not met, the purchase may be cancelled. This is true for either side of the agreement. For conditions related to a specific home purchase, it’s always best to ask your real estate agent. Here are a couple common contingencies you may see:
• Home Sale Contingency – This contingency means the buyer will only purchase the new property if they are able to sell their current home. If they are unable to sell and this contingency is in place, they are afforded the right to back out of the deal.
• Inspection contingency – Buyers have the right to perform a home inspection prior to purchase. If a home inspection turns up an issue with the home, the buyer may choose to renegotiate. The seller may choose to repair the issue(s) or offer a credit to address it. If the home inspection turns up serious red flags, the buyer may be able to back out of the purchase. Some serious issues to look for are: the presence of mold in a home, serious electrical issues which may pose a fire hazard, or leaks which may affect the structure of the home. Also be on the look-out for structural, electrical, or mechanical issues – like a broken hot water heater. These issues could affect what the buyer is willing to pay for the home, as repairs may be costly.
In all cases, the buyer, seller, and their agents will sign the Purchase and Sales Agreement. If you have any questions about items listed on your agreement, check in with your agent. If you do not have an agent and would like help finding one, give us a call! We work with professional real estate agents day in and day out and can help you find one in your area.
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Categories: Closing on a Home