Before you can call a home yours, a lot of paperwork must be completed in real estate transactions, such as buying a house. The purchase and sale agreement is one of these essential documents.
Our goal is to clearly understand what a purchase and sale agreement entails, what makes up the agreement, and what happens next. Whether selling a home in Grants Pass, OR, or buying one in Medford, OR, you will learn more about what goes into a purchase and sale agreement in this article.
What is a purchase and sale agreement?
Both parties accept an offer when the purchase and sale agreement, or PSA, is received. The contract contains all the terms of the purchase and sale of property as part of a real estate transaction. It is important to note that PSAs vary from state to state. It typically includes the final sale price, the earnest money details, the closing date, title information, and a list of contingencies. A detailed timeline as well as any other requests from the buyer or seller will be included in the contract.
Who draws up the purchase and sale agreement?
The buyer's agent or the real estate attorney will draft the contract. This may differ depending on the state in which the property is located. The buyer's agent is responsible for preparing the PSA document in states where escrow agents handle the closing process, such as in the state of Oregon. In areas where attorneys handle closings, attorneys will prepare the documents. The buyer, seller, and their respective agents will sign the document.
What does the PSA consist of?
Depending on the state, this contract may include one or more of the following items.
1) Final sale price:
A purchase and sale agreement specifies the purchase price agreed upon by the buyer and seller. It should be noted that this price may change during negotiations before closing. A buyer, for instance, may be able to negotiate a reduced purchase price if their home inspection uncovers a problem.
2) Earnest money details:
The purchase and sale agreement will include information about the earnest money deposit, such as the dollar amount and instructions for making the deposit. A cashier's check or wire transfer must typically be deposited with a neutral third party in most areas. Escrow and title companies are third-party companies in the state of Oregon. The Buyers will need to make a deposit within one to three days after mutual acceptance or as otherwise stated in the PSA.
3) Closing date:
Your closing date will be when the purchase is completed, the property transfer will be recorded with the local government, and the seller will receive their payment. You will usually sign all the necessary paperwork a few days before closing. Nevertheless, unforeseen events such as delays in your financial paperwork may affect your closing date.
4) Title insurance company:
You will find information about your title company in the purchase and sale agreement. As a buyer, you have the right to select the title company of your choice. Should you have any questions regarding the selection of a title company, you should speak with your real estate agent.
5) Title condition:
A clear or marketable title of ownership will be provided by the seller to the purchaser as part of the purchase and sale agreement.
6) Contingencies:
The home purchase is contingent upon the satisfaction of certain conditions known as contingencies. In the event that one of the contingencies cannot be met, either the buyer or the seller may cancel the sale. The following are some examples of common contingencies.
Common Contingencies
Inspection contingency: As a result of this contingency, the buyer has the opportunity to have the property inspected before making a purchase decision. The buyer can renegotiate with the seller if the inspection reveals problems with the property. It may be possible for the seller to remedy the situation or to offer a credit. The buyer may withdraw from the transaction if the problem is severe without losing the earnest money deposit.
Financing contingency: It is necessary for the buyer to obtain mortgage approval prior to making a purchase under this contingency. It is possible for the buyer to back out of the deal if he or she is unable to obtain mortgage approval.
Title contingency: Under this contingency, the buyer has the right to examine the title of the property to determine if there are any issues or conflicting claims of ownership. If there are issues with the title before the closing date, the buyer may require the seller to resolve them. During this contingency, the buyer can walk away from the transaction.
Appraisal contingency: As a result of this contingency, the buyer is allowed to back out of the purchase agreement or re-negotiate if the home appraisal indicates that the property does not have the value that the buyer intended to borrow and pay for it.
Home sale contingency: The buyer has the right to back out of the deal if they are unable to sell their current residence. This contingency is less common than the other contingencies listed above.
Addendum: A rider, or addendum, is an additional request from a buyer to a seller not included in the original PSA. One example would be a buyer's request that the seller pays part of the buyer's closing costs. As another example, the seller may include appliances or furniture that were not originally included in the home's sale price.
Purchase and sale agreement vs. purchase agreement
Upon the sale of the property, both parties sign the final paperwork called the purchase agreement. Although the purchase and sale agreement may sound similar to the purchase agreement, they are not the same. It is the seller's and buyer's PSA that outlines the terms of the transaction. Following the signing of the PSA, both parties will proceed with the final paperwork for the sale of the house. Upon signing the purchase agreement, the sale is completed.
What happens after the PSA?
A Purchase and Sale Agreement will be signed between the buyer and seller, and the earnest money will be deposited. After the earnest money has been deposited, the buyer and third-party companies will begin the home inspections, title searches, loan agreements, and any other necessary checks described in the agreement. The purchase and sale agreement may take several weeks to be finalized. The reason for this is that it is possible for problems to arise during an inspection. A purchase agreement will be signed by the buyer at the time of closing.
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