Negotiating the Purchase & Sale Agreement

Do you know someone who is thinking of buying a home? Please share this post with them.

In most of the U.S., the Purchase and Sale Agreement (P&S) is the document that conveys equitable title from seller to buyer. Equitable title means that the sale is a done deal unless something happens that’s been spelled out in the P&S. In Mass, it’s usually signed after the home inspection is done and the buyer is sure they want the house. Normally written by attorneys, it can look like a lot of gobbledygook to the rest of us. That’s why it’s so helpful to have an attorney to represent you in any real estate transaction. The P&S has a lot of legal power so it’s important that you know what you’re signing. In most Purchase and Sale Agreements, you’ll find:

• What’s this contract all about? – The purpose of the contract is usually a one-paragraph description saying something like: Ms. Seller of 123 Main St, Anytown USA agrees to sell and Mr. Buyer or 321 Prospect St, Anycity, USA agrees to buy. Make sure your name and address are correct and correctly spelled.
• What’s being bought/sold? – Legal description of the property – this should include the book and page where the deed is recorded at the Registry of Deeds. If there is a separate parking space, like for a condo, that should also be listed. For condos they will also sometimes talk about the percentage of the common areas, etc. 
• What’s included? – Things like appliances, fixtures, if the seller has promised to leave the curtains, etc. Even if you’ve talked about this in detail with the other party or with your agent, if you don’t see it in the P&S, it’s not legally enforceable so don’t be afraid to insist. If you’re the seller and there’s something you want to keep that would normally be included – like a chandelier, your favorite flowering plant or the expensive curtain rods that your mother-in-law bought for you, these must be listed as exclusions. Otherwise, anything that requires a tool to remove is normally included in the sale. 
• Consideration – for a contract to be legal, there has to be some exchange of value. This is usually money, specifically the money that the buyer agreed to pay the seller. It should also list what deposits have already been paid and when the balance is due.
• Time and place – where and when will the closing take place? This is normally either at an attorney’s office or at the Registry of Deeds but it can be anywhere in the U.S. The contract is not enforceable without a time and place.
• Type of possession – sometimes the complete property is not going to be available for the new buyer. For example, there could be tenants, there may be some rights – like mineral rights – that have been leased to a third party or there could be easements for neighbors or utilities. All of these restrictions must be spelled out in the P&S. If there are none it should say that the buyer receives full possession or some thing like that.
• Buyer should receive a “clean” title – this means that any liens on the property – like a mortgage, a mechanics lien, a court settlement – have to be paid off before the buyer takes ownership. The P&S should also say what happens if the seller can’t provide a clean title before the scheduled closing date.
• What could go wrong? – What happens if the house burns down before the closing? What if we can’t get a clean title? What if the buyers don’t get their financing? What if the seller agreed to give $5,000 back at closing? What if the seller agreed to fix the dishwasher? These and lots of other terms, conditions and contingencies along with anything else that has been talked about should be in the P&S. If you don’t see it, it doesn’t exist – legally at least – so if someone told you something, make sure it’s in there.

Read more here