Purchase and sale agreements (real estate)
Understanding the purchase and sale agreement
At its core, a purchase and sale agreement is a legally-binding contract between the buyer and the seller, delineating the specific terms under which a real estate property will change hands. This document serves as a detailed roadmap of the transaction, highlighting crucial aspects such as:
- The agreed-upon purchase price.
- The stipulated closing date.
- Any contingencies that need resolution before finalizing the sale.
- A comprehensive legal description of the property in question.
- Specifics about restrictions or easements affecting the property.
Once both parties append their signatures to this agreement, it activates a legally enforceable commitment to the outlined terms.
Why lenders care about your purchase and sale agreement
From a lender's perspective, the purchase and sale agreement isn't merely another piece of paperwork. It's a window into the nuances of the transaction, providing insight into both the property and the borrower. Key reasons why a lender might request this document include:
- Assessment of loan parameters: With a clear understanding of the property's purchase price and other transaction details, lenders can make informed decisions about the loan amount, tenure, and interest rate.
- Verification of contingencies: Many agreements list contingencies, such as the necessity for a favorable home inspection or the buyer securing adequate financing. Lenders will want to confirm that these contingencies have been, or will be, satisfactorily addressed before disbursing the loan.
- Legal clarity: Ensuring that the agreement is legally sound and the property isn't entangled with undisclosed liens or encumbrances is paramount for lenders.
How to secure your copy
If you're a business owner gearing up for a transaction, obtaining a copy of the Purchase & Sale Agreement is straightforward:
- Directly request one from the other party involved, be it the buyer or the seller.
- The real estate agent or attorney overseeing the transaction typically holds a copy. Approach them if necessary.
- If you're leveraging a loan for the acquisition, your lender might also have a copy on hand.
For those venturing into commercial real estate, brace yourself for a more intricate agreement. Commercial agreements often dive deeper, encapsulating nuances like zoning regulations, environmental concerns, and tenant rights.