It’s not always easy to know what to expect when you’re buying or selling a home. To help smooth the process, it’s important to understand the basics of a purchase and sale agreement. This document outlines the terms and conditions of the sale, and should be negotiated and agreed to by both parties. Here’s what you need to know about preparing a purchase and sale agreement.
What is a purchase and sale agreement?
A purchase and sale agreement should include the terms of the purchase. It is important for both parties to agree on these terms. When you purchase or sell a home, the purchase and sale agreement will include information like purchase price, closing date, or terms for the purchase.
According to Red Deer Lawyers Some of these terms may be negotiable. For example, the purchase and sale agreement may state that the buyer is responsible for certain expenses such as taxes or maintenance fees. This would be negotiable to an extent; sometimes the seller will agree to pay those costs on the condition that the buyer will purchase a certain level of homeowner’s insurance. It is important for both parties to discuss these matters and come to an agreement that suits their needs and financial situation.
Why do you need a purchase and sale agreement?
Arranging a purchase and sale agreement is the ideal way to communicate important details about your purchase. It can help avoid confusion or miscommunication, which could lead to disputes. It’s also a good way to make sure the purchase process runs smoothly.
Preparing the agreement
Choose a real estate agent
This is a good idea, as they have experience in these matters. You can find a real estate agent by asking friends and family for recommendations or by searching online directories. Agents should be able to refer you to purchase and sale agreements that reference similar transactions.
Determine your budget and what you’re looking for in a home
You need to study the purchase and sale agreement so that you know what your financial responsibilities will be. You may find it helpful to know about purchasing a home in advance so you can get an idea of how much money you’re likely to spend. Also, discuss with your agent:
- the types of properties you’re interested in (e.g., detached homes, townhouses, condos)
- your budget
- the purchase price you’re willing to pay for a home
Prepare an offer
You’ll need to prepare a purchase and sale agreement before contacting the seller. Generally, this means sending an offer for the home with the purchase price stated in writing, along with a purchase deadline.
When preparing an offer for a home, you’ll need to include:
- Your name and contact information
- The purchase price you’re willing to pay for the home
- Details about the financing you’ll use to purchase the home
- The date by which you would like to purchase the home
- A clause that allows you to back out of the purchase agreement under specific circumstances, such as if you don’t get approved for a mortgage or the property doesn’t appraise at the purchase price
- Any other specific terms or conditions you’d like to include
Complete the due diligence process
The due diligence process is important for both the buyer and seller. This is the time when the buyer will conduct inspections and appraisals of the property. The purpose of this process is to ensure that the purchase is a good investment for the buyer, and that the property is in good condition.
The purchase and sale agreement should state who is responsible for which costs related to the due diligence process. For example, the buyer might be responsible for paying for the home inspection, while the seller would be responsible for repairs discovered as a result of the inspection.
Sign a purchase and sale agreement with your chosen agent
When you find a purchase and sale agreement that suits your needs, have it reviewed by the agent to ensure there are no mistakes or problems. You can then sign the purchase and sale agreement with your chosen agent so they can take the necessary steps towards closing the purchase.
The purchase and sale agreement should include:
- The names of the buyer and seller
- The purchase price
- Information about how funds will be transferred for the purchase (e.g., cash, cheque)
- Information about what is included in the purchase (e.g., appliances, furniture, landscaping)
- Financial responsibilities (e.g., taxes, utility bills)
- Specific purchase terms (e.g., condition of the home, possession date)
- The purchase deadline
If your purchase and sale agreement includes a due diligence clause, you will have up to 10 days after signing the purchase and sale agreement to withdraw from the purchase if it turns out that inspections reveal unexpected issues with the property.
Finalize the sale or purchase of the property
In the end, you’ll need to make arrangements for the purchase to be finalized. This might involve exchanging funds, signing over deeds, signing over leases, and ensuring utilities are transferred.
Final thoughts
A purchase and sale agreement is very valuable for anyone buying or selling real estate. Anyone preparing a purchase and sale agreement should have in mind some important steps that were discussed in the article. It will take time to draw up an accurate contract but if you do these things right from the beginning, your process may be much smoother than expected!
