When you are buying, or selling a residential property, you should always have a written sale and purchase agreement. These agreements are a legally binding contract between the buyer and seller with the agreed terms and conditions of the sale/purchase. They will include but not limited to:
- The agreed price
- The inclusion of any chattels such as white wear, floorings and any agreed furniture
- The type of title – such as freehold or leasehold
- Any conditions the buyer and seller want fulfilled before the contract is agreed
- Deposits and interest on overdue payments
- The date of the agreement will become unconditional
- The settlement date
- Any deposit the buyer must pay.
The agreement will also include any additional obligations and conditions that the buyer/seller must abide by.
As a seller, you may also want to include an ‘escape’ clause which allows you to keep the house on the market while the buyer sorts out the conditions such as arranging finance. If you receive another offer during this period, the clause gives the buyer a set number of days to make an unconditional offer. If they do not act, you are free to take up the other buyers offer.
Why do I need a sale and purchase agreement?
It is a legally binding contract that will provide certainty to the buyer and seller as it sets out in writing all the terms and conditions. Both parties are able to negotiate their terms, through the agent, until they both reach an agreement.
Defaulting the agreement
The agreement will cover the penalties and compensation costs that the must be paid if the buyer/seller defaults on the terms of the agreement, for example, delaying the settlement.
Deposits
When both parties agree on all clauses in the agreement, a deposit is paid to the real estate agent by the buyer. The agent usually takes their commission from the deposit when the offer becomes unconditional. It is important to identify if all conditions have been met as once the offer becomes unconditional, you will not get your money back should you change your mind.
The settlement date
The agreement will outline the settlement date. This is the date when the buyer pays the rest of the amount agreed for the property, usually through their lawyer. The settlement date is usually the day when the keys are handed over and the buyer can move into their new property.