What is an agreement of sale?

An agreement of sale is a contract and legal document used when a person wants to sell something to another person. The thing being sold could be a house, a car, a business, or any other item or property. The sale agreement outlines all the details, including the price, when the item will be delivered, and other essential terms.

Who is involved in an agreement of sale?

There are two main parties in an agreement of sale:

1. The seller: This person currently owns the item being sold. They agree to transfer ownership to the buyer.
2. The buyer: This is the person who wants to purchase the item. They agree to pay the seller the agreed-upon price.

Sometimes, other parties, like lawyers or real estate agents, may be involved, too. However, the buyer and seller are always the two most important people.

What does an agreement of sale include?

A typical agreement of sale will have a lot of different sections and clauses. Some of the most important things it covers are:

Price and payment terms

The agreement clearly states the total price the buyer has agreed to pay and explains how the buyer will pay. Will they pay all at once or in smaller amounts over time? When are the payments due? What happens if the buyer is late on a payment? All of this is laid out.

Description of the item being sold

The agreement will identify precisely what is being sold. For a house, it would have the full address and legal description of the property. If it’s a car, it would have the make, model, year, and other details. This ensures everyone is 100% clear on what the sale includes.

Condition of the item

The agreement will state the item’s condition. Is the house being sold “as is,” or will the seller make certain repairs first? Is the car still under warranty? The buyer needs to know precisely what they’re getting.

Closing and possession dates

A closing date will occur if a house or land is being sold. This is the day that the sale becomes final. The buyer pays any remaining money owed. The seller signs over the deed, which officially transfers ownership. The agreement will also say when the buyer can take possession—meaning when they can move into the house or start using the property. Sometimes, this is the same day as closing, but not always.

Contingencies

A contingency needs to happen before the sale can be completed. Some common ones:

• The buyer needs to secure financing (get approved for a mortgage)
• The home needs to pass an inspection
• The buyer needs to sell their current home first. If any contingencies are unmet, the buyer can usually back out of the deal and get their deposit money back. The agreement lists all contingencies and explains them in detail.

What happens after signing?

Once the buyer and seller have signed the sale agreement, they are legally bound to complete the transaction. If either party tries to back out for a reason not allowed in the agreement, the other party can sue them. So it’s a solemn commitment.

After signing, the buyer usually has time to complete any contingencies, like getting their mortgage approved and doing a home inspection. Meanwhile, the seller has to take the property off the market. They can’t keep trying to find other buyers.

As the closing date approaches, the buyer and seller work with their lawyers or real estate agents to prepare all the final paperwork, including the deed, title insurance, and closing statements.

On closing day, the buyer brings the payment (the total cash price or the down payment if they’re using a mortgage). The seller signs over the deed, legally transferring ownership to the buyer. This usually happens at the office of a lawyer or title company. The sale is complete once everything is signed and the money is paid. The buyer gets the keys and can move in.

Why is an agreement of sale important?

Buying or selling property is a substantial financial decision. Much money is significant in life changes like moving homes. The sale agreement helps protect both the buyer and the seller by putting everything in writing. It clearly states what each party has agreed to do, helping prevent confusion or arguments later on.

The agreement gives the buyer time to arrange financing, inspect the property, and make sure it’s really what they want before the sale is final. It also locks in the price so the seller can’t suddenly charge more.

For the seller, the agreement proves the buyer is serious. It commits the buyer to the price and timeline they’ve agreed to. If the buyer doesn’t follow through, the seller usually gets to keep their deposit money.

Do I need a lawyer?

Most experts recommend having a lawyer review the sale agreement before you sign, whether you’re the buyer or the seller. Property law can be complex. The terms of these agreements can be complicated to understand if you’re not used to legal language. A lawyer can make sure you fully understand what you’re agreeing to. They can also point out risks or suggest better ways to protect your interests.

In some straightforward transactions, the buyer and seller might feel comfortable proceeding without a lawyer. It’s a personal choice. However, in most cases, having professional advice is safer and helps the deal go more smoothly.