The Purchase and Sales agreement, commonly referred to as the P&S in real estate deals, is the contract that governs the transaction. Such documents are often long, detailed, full of legalese, and most significantly, binding, making it an essential item to familiarize yourself with before signing.
When it comes to the P&S, most real estate agents generally use the standard form provided by the state’s Realtor board, so not only is there no need to hire an attorney to draft one, you can look up the form online. Below are definitions of some of the most common provisions in a P&S. Understanding these terms will allow you to have productive conversations with your agent to make sure the document reflects your desired terms and conditions:
- Price: The P&S will include the purchase price of the property. It will also indicate the type of payment, any adjustments and terms or deadlines.
- Escrow: A contract will specify the buyer’s deposit amount, when it’s due, where it will be held and when and how it will be released.
- Mortgage: P&S documents will list the amount of a mortgage a buyer needs to finance the purchase as well as the date by which they need to secure it.
- Closing Date: A contract will list the date of the sale’s closing. Keep in mind that any changes to this timing must be agreed to in writing.
- Exclusions: Sometimes, there will be specific fixtures, appliances or other items the seller wants to exclude from the deal or, conversely, that the buyer wants as part of the purchase. The P&S would describe these.
- Disclosures: Depending on the state, the seller may be required to disclose certain information that may affect the safety or value of a property like lead paint.
- Inspections: Typically, a P&S will list one or more inspections to be performed, the results of which must satisfy the buyer, and the deadline to complete them. Depending on the results, and the parties’ agreement on next steps, a revised P&S may be required.
- Contingencies: In addition to mortgage and inspection contingencies, a P&S may also contain other contingencies, like the home sale contingency that allows the buyer the ability to back out of the deal if they’re unable to sell their current home.
One more thing to keep in mind: Anything else that falls outside of the norm (basically, anything that doesn’t fit within the terms and conditions noted above) may require the help of an attorney to revise the language in the P&S or draft a rider.
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