One of the most important documents you need when trying to buy a piece of real estate is the purchase and sale contract. It is a document that can serve different purposes to the seller and buyer alike and sets the pace to close the transaction.
However, there are a lot of bad contracts out there. And most times, it would take a good understanding of what a purchase and sales contract is to tell the difference between the good and bad. But, it is not enough to just be able to tell the difference. You should be able to know exactly what you agree to and what is expected of you to acquire your desired piece of real estate.
This is the reason this article is worth reading. Now, let’s start from the very top.
WHAT IS A REAL ESTATE PURCHASE AND SALES CONTRACT?
A real estate purchase and sales contract can simply be referred to as the document that removes ambiguity or brings clarity to the buying and selling of real estate. To further explain, it is a document that contains the expectation of both parties involved in the transaction.
A real estate purchase and sales contract spells out the transaction details and the responsibility of both parties during the transaction. This means that the primary use of this contract is to facilitate the buying and selling of real estate but it is not an indication that the transaction is complete.
Are you wondering why?
It’s because you are entitled to another document once the purchase process is complete. The document you get after you close the deal is called The Purchase Agreement. It is quite different from the purchase and sales contract as earlier stated. A purchase agreement only carries the information that certifies that you now own the property.
So, the quickest way to understand this and tell both documents apart is this: a real estate purchase and sales contract provide guidelines and open up negotiations while a purchase agreement serves as proof that the buyer has successfully purchased the property from the seller.
However, this brings one important question to mind: how binding are real estate purchase and sales contracts?
HOW BINDING IS THE PURCHASE AND SALES CONTRACT?
The real estate purchase and sales contract is a legally binding agreement, just as much as any contract you know. How so? You may want to know. Since signing it doesn’t mean you have acquired the property just yet.
True, that is the case, but it is legally binding because it can be used as a reference if one party is not upholding their end of the deal. In a real estate purchase and sales contract, there are terms and conditions which have legal implications once they are violated.
HOW THE REAL ESTATE PURCHASE AND SALES CONTRACT WORKS
A real estate purchase and sales contract becomes activated when the parties involved sign it. At the moment it is signed, it represents the commitment of the buyer and seller to complete the transaction. And usually, there are cancellation penalties when either of them defaults.
To avoid these penalties, both parties are expected to negotiate to agree on favourable terms and conditions that would form the basis for the sale of the property. With these requirements penned down the participants in the agreement are guided throughout the transaction.
The point of having a contract is to be able to layout specific requirements and acceptable methods that facilitate the sale of the property. During the period of negotiation, both parties decide on how to deal with everything in the purchase process, from financing to the transfer of ownership.
WHAT YOU FIND IN A REAL ESTATE PURCHASE AND SALES CONTRACT
- Participants in the agreement
This is usually the first information you find in a real estate purchase and sales contract. The parties involved in the purchase process are generally identified before every other detail follows. This part of the contract specifies who the buyer is and who the seller is, and also goes further to give a brief description of who both parties are.
However, it is possible to have multiple persons playing as the buyer or seller. In this case, every person
representing the buying or selling party, whichever the case may be must have their signatures on the contract to show their agreement.
- Purchase and sale agreement
This part gives the document its name. The purchase and sale agreement section is the most important part of the real estate purchase and sales contract.
In this section, you’ll find a lot of legal terms that spell out who does what, at what time, where and how it would be done. This is also where the relevant rights are laid out so both parties are aware and on the same page as to what would happen.
This provision in the contract is set to achieve three things:
- Inform both parties about their responsibilities and their rights.
- Bring both participants peace of mind, and
- Guarantee the commitment of both participants.
- Restriction clauses
Restriction clauses in the real estate purchase and sales contract is used to create and set boundaries to the provisions we mentioned earlier.
These restrictions will prohibit involved participants from going beyond the signed contract. And the violation of these rules would of course attract some legal consequences.
This part informs what would happen once the purchase process is complete. It contains information such as other documents the buyer is expected to receive; also further actions the buyer is expected to perform to officially finalize the transaction.
Now that you have an idea of what a real estate purchase and sales contract should look like, how do you write one to facilitate the sales of your property?
HOW TO WRITE A REAL ESTATE PURCHASE AND SALES CONTRACT
The first step is to define the following:
- The address of the property to be purchased, as well as all required legal descriptions.
- The buyers’ names and addresses.
- The property’s price and the terms of the purchase.
- The closing date and costs.
With this information on hand, you can get a contract template online to follow, tweaking it a little to suit your purpose. But this is just one stressful way to go about it which may lead to future complications unless you have a property lawyer that would go through it after you are done.
But let’s show you a better way! The better way is to have a property lawyer draft the purchase and sales contract for you. Why? Because they are the expert in this field plus their services will save you a lot of complications in future.
But still, there is a more remarkable way to get this done.
How would you like to have a professional real estate purchase and sales contract made and at the same have your property sold? Yes, it’s possible.
Alexander Nelson Consulting is a real estate marketing company that can provide you with such a service; that dual package. We have an in-house legal team that will take care of the contract and our clients benefit from our various marketing platforms where we can have your property sold.
One thing worse than a lack of contract is a badly worded one. So you see why it is important to have the professionals in on this.
The purpose and significance of having a real estate purchase and sales contract is to make the intentions of the involved parties clearer. This is one goal that following the golden rules of advertising gives no result and effective sales techniques will come up short in helping a seller accomplish his sale.