An Agreement of Purchase and Sale is a written agreement between a buyer and a seller in a real estate transaction. A prospective buyer initiates the agreement by drafting an offer document with their lawyer, and if the seller accepts, the agreement then becomes legally binding. The Agreement of Purchase and Sale serves as a safe and official way to regulate property sales and prevent unwarranted cancellations.
What is Included in an Agreement of Purchase and Sale?
It is important that the information in an Agreement of Purchase and Sale is well-worded and thoroughly documented. Since this is a legally binding contract, it is important to be clear about any specific terms or conditions. It is also crucial to avoid any legal loopholes by being extremely particular and precise in the agreement.
Here are some common components of an Agreement of Purchase and Sale:
- Offer Price and Deposit Amount: The offer price is the number that the buyer is offering for the property in question. The deposit amount may also be included.
- Closing Date and Irrevocable Date: The closing date of a real estate transaction is the date when legal ownership is passed from the seller to the buyer. The irrevocable date is the date when the offer made in the agreement expires.
- Basic Property Details: Key information such as the property address, physical description of the property, and a legal description of the property are examples of the types of details outlined in an Agreement of Purchase and Sale.
- Legal Names: Full names of all parties involved on both the side of the buyer and the seller.
- Fixtures and Chattels: Items that are included or excluded from the property will also be listed.
Fixtures are improvements that have been made to a property that are considered immovable or difficult to move. Some common examples of fixtures are: built-in cabinets, outdoor sheds, or lighting fixtures.
Chattels are movable and exchangeable items that are contained on the property. Some common examples of chattels include washers and dryers, refrigerators, and window coverings.
Fixtures and chattels are dealt with differently when it comes to property sales. Fixtures are assumed to be included in the property unless otherwise specified in the Agreement of Purchase and Sale. Chattels need to be specified in the Agreement of Purchase and Sale, otherwise, there is a good chance that they could be excluded from the property. If there is any doubt when it comes to the ownership of fixtures and chattels, the agreement is the perfect place to clarify.
- Rental Items: The rental contracts for commonly rented items, such as solar panels or a hot water heater, will be transferred over to the buyer when they obtain property ownership.
- HST Information: HST tax, otherwise known as Harmonized Sales Tax, must be paid on purchases of new homes. The Agreement of Purchase and Sale is a good place to clarify whether the HST is already included in the purchase price, or if it is still owed after the fact.
- A Requisition Date: Also known as a title search date, a requisition date is an important part of the agreement. This is the final date by which the buyer needs to have completed any searches into the property’s title document. This is done to prevent any issues from arising, such as unknown liens that could be attached to the property’s title.
- Other Terms and Conditions: Any additional terms and conditions related to the sale of the property should be laid out in the Agreement of Purchase and Sale. These vary based on the market’s competitiveness and an individual’s personal or financial circumstance. Some commonly used conditions may include permitting the buyer to schedule a home inspection or the sale being contingent on the buyer securing financing.
- Additional Standard Clauses: These may include matters of spousal consent, tax arrangements, insurance, and so on.
A well-detailed Agreement of Purchase and Sale is the best way to ensure that both the buyer and the seller are satisfied in any real estate transaction. If you have any questions, be sure to contact our team today.
