Like most of our major transactions such as buying a car, receiving payment for services, and the like, purchasing a house or any piece of real estate comes with a contract that serves as a memorandum of agreement between the home buyer and the real estate company or the bank. Typically called a Purchase and Sale Agreement, it generally outlines the terms of your purchase and all the fine print that comes with it.
When you hear the term “Purchase and Sale Agreement”, you can already easily note that the contract will be about home buying and the terms that come with your purchase. Buying a house is a great feeling – a life goal achieved! – however, it comes with a lot of terms you have to understand such as all the costs associated with your purchase, the deed, and title of the property, financial documents of which the type depends on how you purchased your home, and other negotiations needed.
Admittedly, a Purchase and Sale Agreement is one of the most technical and longer contracts you’ll have to sign in your life, so we’re here to break it down and make it more understandable. Understanding your Purchase and Sale Agreement rests on knowing what the contents of each section would be so here’s a breakdown of what you can expect in your agreement:
Besides the market value that you are buying your property in, there are a couple of other costs that you’ll have to consider. This may be a closing cost for your deal with the previous homeowner/real estate agency, the breakdown of your mortgage payment plan if you took out a mortgage, and any and all other costs. You’ll have to read this part thoroughly as it lets you know the total amount that you’ll actually be paying for the house.
Deed and Title of the Property
This is the declaration and the single most important piece of paper that the house is yours. Having the title and deed to the property you purchased makes you the rightful and legal owner and validates your purchase so make sure that when you check your Purchase and Sale Agreement that it’s there.
Relevant Financial Documents
There are several ways to buy a house, it can be either through government funding, a private loan, cold cash, or a mortgage loan agreement. Depending on how you were able to purchase the house, this section of your Purchase and Sale Agreement contains the terms and conditions of your type of funding. For example, if it was a mortgage you took out, your entire mortgage agreement would be here in this section to provide transparency on how you purchased the house.
Contingencies and Considerations
Other important points that can be listed in a Purchase and Sale Agreement that you’ll often see are conditions of your house inspection and other preliminary searches or processes before it is turned over to you such as the closing date. This is the last part, where you sign and make the entire agreement binding and effective and the final terms of payment before your occupancy and other clauses that you and the seller may choose to include.
It is important to note that among all the sections of your Purchase and Sale Agreement, the contingencies and considerations and closing section is the one that you should be EXTRA careful and thorough with. This may contain details written in fine print or technical terms that you may be unaware of and be surprised with when it’s enacted by the other signees of your agreement.
Because of possibilities such as this, it is always important to have either legal counsel or even just a friend or family run through the Purchase and Sale Agreement and be present as a witness during the conversation or meeting between you and the seller when you sign the contract. You can never be too sure and we just want you to have a seamless purchase of your brand new home!
Overall, once you know the contents and what to expect from a Purchase and Sale Agreement, you’ll be able to agree or contest to each clause depending on how accurate it is and give you the leeway to be able to make sure the terms are favorable to you before signing. Once all conditions meet your terms and are acceptable to you, you can sign it over, complete your final payment before closing, and voila, welcome to your New Home!