When purchasing or selling real estate, parties will almost always execute a purchase and sale agreement prior to the actual transaction (referred to as “the closing”) taking place. This is in contrast to most other types of transactions in which the exchange of funds for property is concurrent with the execution of the contract for the sale, and where the contract is often oral or implied (e.g. a purchase of an appliance). The reasons for this in the context of a real estate transaction are not hard to comprehend: real estate often involves enormous amounts of money, complex financing and closing procedures not present in most transactions, and numerous contingencies and covenants relating to the nature of the property. All of these can and often should be addressed in the purchase and sale agreement. Buyers and sellers of both residential and commercial real estate are highly encouraged to work with counsel in drafting, negotiating, and executing a purchase and sale agreement as well as in considering what litigation strategies are available when a purchase and sale agreement is potentially breached by either party. Below are some of the basics regarding what should be listed in a purchase and sale agreement.
Physical Description of the Property to Be Sold
A key aspect of the purchase and sale agreement is, of course, a description of the property itself to be sold. While this will certainly include identifying descriptions such as the address, more complicated issues can arise with regard to giving specific property boundaries as well as descriptions of whether fixtures and/or equipment (e.g. a swimming pool or air conditioning unit) are included in the sale.
Covenants Relating to Land Use
The agreement should also include descriptions of other non-physical aspects, such as covenants relating to use of the property, for example whether there are covenants against commercial or residential use of the property. Easements should also be included and potential zoning issues of which a buyer may need to be made aware. The agreement may also include warranties regarding any other potential interests in the property.
Financial Terms of the Real Estate Transaction
The price of the property should be listed here, as well as the often numerous other financial terms of the transaction, such as amount of the down payment, use of financing, insurance, how funds will be transferred, and so on.
Representations Regarding Financing
Related to the financial terms of the transaction, purchasers are often required to make representations regarding their financing. Transactions often fall through between the purchase and sale agreement and the closing as a result of a purchaser’s financing not coming through, which can cause significant damage to a seller who may have turned down other offers. Thus, by including representations in the purchase and sale agreement, a seller may have legal recourse in such an event.
Contingency Matters
This is a catch-all area to describe the various procedures and recourse either party may have if the other party fails to follow through on the requirements of the agreement, e.g. a failure to obtain financing. This can dictate dispute resolution rights and obligations such as applicable law and procedures for going to court.
Contact the Real Estate Attorneys at Wagenseller Law Firm
At Wagenseller Law Firm in downtown Los Angeles, we provide full legal services to individuals and businesses in business and real estate litigation matters. Contact the Wagenseller Law Firm today to schedule a consultation to discuss your purchase and sale agreement matter.