Contract of Purchase and Sale
Definition and meaning of Contract of Purchase and Sale in real estate.
A contract of purchase and sale is a written legal agreement between a buyer and a seller that outlines the terms, conditions, and price for the transfer of a specific property. This document serves as the roadmap for the transaction from the initial offer until the closing day.
In more detail
Once both parties sign this contract, it becomes legally binding and establishes the obligations each party must fulfill before ownership can change hands. The contract specifies details such as the purchase price, earnest money deposit, property disclosures, inspections, and closing dates. It also includes contingencies that protect the buyer, such as securing a mortgage. In many states, standard templates prepared by local real estate associations are used to draft this agreement.
Key facts
| Category | Buying & Selling |
|---|---|
| Also known as | Purchase agreement or sales contract |
| Essential details | Purchase price, earnest money amount, contingencies, and closing date |
| Binding status | Legally binding once signed by both the buyer and the seller |
A buyer submits a contract of purchase and sale offering a set price for a suburban home, which the seller accepts and signs, initiating the closing process.
Frequently asked questions
Can a buyer back out of a contract of purchase and sale?
A buyer can typically back out only if a specific contingency, such as a home inspection or financing, is not met. Otherwise, they risk losing their earnest money.
What happens after the contract of purchase and sale is signed?
The transaction enters the escrow phase, during which inspections are performed, the title search is completed, financing is finalized, and closing documents are prepared.