Who writes the purchase and sale agreement

A purchase and sale agreement, also called a sales and purchase agreement or a purchase and sales contract, is a legally binding document that parties in a transaction use to stipulate the terms and conditions that will guide the sale and transfer of goods or property.

A key thing about a purchase and sale agreement is that it does not transfer the property or goods that the parties are negotiating. What it does is create an obligation for the seller to sell, and an obligation for the buyer to buy.

Transactions that use purchase and sale agreements, such as real estate transactions, are complex transactions that may span into weeks and involve lots of processes and stages. These agreements provides a clear roadmap so parties know what they can expect at each point.

A purchase and sale agreement is not the same as a purchase agreement. A purchase agreement is the final document used to transfer a property from the seller to the buyer, while a purchase and sale agreement specifies the terms of the transaction. Parties will sign a purchase agreement after both parties have complied with the terms of the purchase and sale agreement.

A purchase and sale agreement is also not a purchase order. A purchase order is a document that contains a list of supplies or products a buyer wants to buy from a seller.

A purchase and sale agreement is used to document the parties’ intentions and the terms they have agreed will govern the transaction. You can include specific terms like the product or property, the price of the product or property, conditions for the delivery of the product, and the date of product delivery.

Writing these things down protects each party’s interests by ensuring that there is a legally binding agreement they can resort to if there is a dispute. It also protects any deposit the buyer makes on the transaction and secures their commitment.

In real estate transactions, parties use these agreements to make provisions for the buyer to inspect the property. It also details any defects the property has that are known to the seller. The contracts usually contain conditions that could lead to the termination of the agreement; for example, if the buyer is not satisfied after inspecting the property.

We mentioned earlier that they are commonly used in real estate transactions; however, you can also use them in other types of property transactions, like vehicle sales.

Purchase and sale agreements are also used in the transactions of company stock. Parties can also use them where a business is acquiring another business.

In addition, you may use it when purchasing large-volume and expensive materials from a supplier when the supply will span over a period of time. This can be useful for routine purchases of these types of supplies since it helps suppliers and purchasers keep an estimate of demand and cost.

To write a purchase and sale agreement, you’ll need to include the following elements:

  • Identity of the parties: Include the names of the parties in the transaction. Parties in the agreement may be individuals or organizations. Ensure that you write their full legal names and their contact information.
  • Description of the property or products: Describe the property or the product in absolute detail. Make sure that the description identifies the property without any ambiguity. If the subject matter is a product, state the quality of the product and specifications.
  • The purchase price: State the price the parties have agreed on for the purchase of the property or product.
  • Type of payment: State how the buyer will pay the seller for the product or property. Payment can be in cash, shares, financing, etc.
  • Terms of delivery: Write when and how the seller will supply the product. In the case of a property transaction, it would instead be how and when the seller will transfer property ownership.
  • Closing date for the sale: State the date the parties will come together to close the sale. Closing involves the signing of the document to transfer the property from the seller to the buyer.
  • Definition of terms: Include the definition of the meaning of key terms used in the agreement. Parties may use some terms differently or may want to limit or expand the meaning of certain words. A definition section will help you to do that.
  • Warranties: Detail any warranties that the seller is making in the agreement. A seller in an agreement for the sale of goods may make certain warranties as to the quality of the product. In a real estate transaction, a seller might make warranties on ownership and possession of the property.
  • The deposit amount: Agree on the amount of money the buyer will pay as deposit or earnest money and where it will be held in escrow. The deposit is put in an escrow account pending when parties complete the transaction or if the transaction falls through.
  • Dispute resolution: Decide how parties will resolve any dispute relating to the agreement. Parties can opt for arbitration or mediation.
  • Contingencies: State any conditions that any party must meet before the transaction can be completed. For example, you can provide an inspection contingency that will allow the buyer to back off if, during the inspection, they discover something about the property that they cannot overlook. Other contingencies can be financial, title, or appraisal.
  • Penalty: Agree on the consequences if any party defaults or fails to follow through with the agreement without a valid reason.

To manage your agreements efficiently, you need to pay close attention, as the stakes are often high. Various transactions are rarely the same. A purchase and sale agreement is also not the final document, so parties can (and usually will) renegotiate some terms before closing the transaction.

You’ll need to monitor the agreement closely to ensure that parties follow the terms or to discover when you may renegotiate more favorable terms. Often, parties may use an addendum to change the terms of the agreement or to add additional terms.

You can use an addendum to change the closing date, inspection periods, or purchase price. For instance, in a business purchase transaction the buyer might discover that the business is worth a lot less than the price they offered because it has a high employee turnover. The buyer may then decide to continue with the transaction but will offer a lower price. Parties will renegotiate on price and use an addendum to modify the new cost. You may have several addenda to one purchase and sale agreement.

Managing a purchase and sale agreement is more challenging if your organization does not use a contract lifecycle management (CLM) software in managing your contracts. This type of agreement is unique in that it facilitates a transaction.

Any lack of contract visibility, poor communication between stakeholders, or inefficient tracking of contract key deadlines—which are common in the traditional method of contract management—will adversely affect the outcome. This is why innovative businesses use contract lifecycle management software to manage their purchase and sale agreements, as well as their other business contracts.

Using a contract management software will automate your contract workflows, which will help you create agreements faster, communicate efficiently with both internal and external stakeholders, and stay on top of your obligations and key timelines.

Ironclad’s CLM is an enterprise-grade contract management software designed to handle all contract management lifecycle stages for organizations of all sizes.

With Ironclad’s CLM, you can increase your contracting efficiency by creating templates of workflows for your organization’s purchase and sale agreement. You can save time and resources by using Ironclad’s central platform for creating, approving, revising, editing, negotiating, and redlining your purchase and sale agreement.

Ironclad’s central repository ensures you and your team can have access to and track your purchase and sale agreements without hassle. Our CLM software can also help you create an addendum to your purchase and sale agreement conveniently if it’s needed.

There is a lot at stake in any real estate transaction. Whether you are purchasing a home, residential rental property, commercial property, or even a parcel of vacant land, buying real estate can be a big investment and a big risk. Selling property can be just as important. Whether you’re a real estate investor or you’re simply selling your personal residence, moving on can depend upon the successful and profitable sale of your current property.

Both the buyer and the seller must take care to fully protect their rights and interests—otherwise, they may experience significant losses due to undiscovered issues with the property, poorly-drafted sales contracts, or shoddy legal work. Any time you enter into a real estate transaction, you risk losing assets. Depending on the terms, you could lose your business, your personal wealth, or even your home. To limit your risk, you need to make sure that your purchase and sale agreement is properly drafted to protect you.

Purchase and Sale Agreements are Contracts

Like any other type of contract, a purchase and sale agreement is legally binding. If one party fails to adhere to the contract, the other party generally has the right to take legal action to recover the damages from any harm the first party’s failure to perform has caused. Additionally or alternatively, one party may sue to force the other party to perform under the terms and conditions of the contract.

It is always in your interest to fully understand the implications of every single term and condition in any contract you sign. This is especially true for purchase and sale agreements where the stakes are usually high.

Aside from the basic requirements for a valid contract (offer, acceptance, and consideration), there are no set terms for purchase and sale agreements. Many people use standardized forms, but this is often inadequate. The higher the stakes, the more important it is for the parties to finely parse out the conditions of the contract. The specific terms and complexity of any agreement depend on the nuances of the situation and on the desires of the parties. Thus, in some cases, a few pages will suffice, but in others, the purchase and sales agreements have to be much longer.

In contracts, every nuance matters. Thus, the more important the investment, the more important it is to have a contract that is tailored to your circumstances and crafted by a knowledgeable attorney who works with these kinds of real estate contracts routinely.

In negotiations, knowledge is power. Hiring a good attorney with an intimate understanding of contracts can put you in a better position to negotiate with the opposing party. He can push to include the nuanced language that protects your interests, and get you the most value possible. At the Brink Law Firm, we understand the importance of even the slightest term of a contract and how dramatically it can change the outcome of your transaction.

Overseeing Commercial Real Estate Transactions

Generally speaking, when a buyer and seller agree to the terms and conditions of a proposed transaction for a commercial property, one party’s attorney will draft and send the initial purchase and sale agreement to the other party’s attorney. This agreement should usually contain the following basic terms and conditions:

  • Legal description and address of the property in question
  • Any terms for a sale “as-is”
  • Description of transfer documents (for example, deed, bill of sale, assignment, etc.)
  • Purchase price (either by a set amount or per square foot, which may be adjusted after a survey)
  • Adjustments to the price to be made at closing
  • Who holds the deposit (for example, title insurance company), and what happens to the deposit when the transaction fails or closes
  • Any contingencies of either party, which can include inspections, clear title, lease review, land use permits, environmental issues, financing securement, and more
  • Default provisions
  • Representations and warranties made by the both parties
  • Duties of the parties during the pending transaction, such as keeping up the property, insuring the property, and continued management of tenants
  • Scope of broker involvement in the deal
  • Assignment rights of the buyer
  • Various boilerplate terms
  • Information regarding closing
  • Letter of intent
  • Confidentiality agreement

In addition to the above terms and conditions, each purchase and sale agreement should contain provisions specifically tailored to the property in question. For example, the sale of a strip mall with multiple retail tenants will require different terms than the sale of an industrial warehouse or an undeveloped parcel of land. The contract should cover all the necessary issues relevant to your particular transaction.

Representing Home Buyers and Sellers

While residential real estate contracts are sometimes less complicated than commercial ones, these contracts can also contain unfavorable terms—and the parties may not notice until it is too late. A residential purchase and sale agreement should typically include the following basics terms:

  • Legal description and address of the property
  • Purchase price
  • Earnest money deposit
  • Down payment
  • Financing contingency, if applicable
  • Closing information
  • Date to take possession
  • Who holds the deposit (for example, a title insurance company) and what happens to the deposit if the transaction fails or closes
  • Items that are and are not to be included in the sale
  • Title guarantees advanced by either party
  • Duties of the parties during the pending transaction, such as keeping up the property, paying utilities, taxes, and insurance
  • Inspection contingencies and walk-through inspections
  • Penalties for delayed possession caused by either party
  • Contingencies on the sale of either party’s other home
  • Seller’s Disclosure Statement

Whether you are a buyer or a seller, you should carefully check these contracts with an experienced lawyer who routinely reviews such documents to ensure that your rights are protected.

Discuss Your Transaction with a Washington Real Estate Lawyer Today

While brokers and agents are often key players in real estate transactions, they don’t always understand the nuances of the laws at stake. If your case is complicated, you should hire an attorney who can thoroughly evaluate your contracts, identify questionable terms, and negotiate on your behalf to include favorable terms.

Before becoming a real estate attorney, Terry Brink ran his own real estate brokerage business for many years. He still holds a brokerage license and owns many residential and commercial properties in the south sound area. Combined with nearly 30 years of real estate law experience, the Brink Law Firm is in a unique position to provide the highest quality of representation to buyers and sellers. To schedule an appointment with the Brink Law Firm, contact us online or call 253.620.6666 today.