Blocks & Lots

Going into Contract: Here’s what you need to know

Definition of ‘Contract of Sale’

A real estate ‘Contract of Sale’ is also known as a ‘Purchase And Sales Agreement’. It serves as a legally binding agreement between two parties — usually the buyer and seller— concerning the terms of purchase or transfer of real property.

When do I enter into a Contract of Sale?

This usually occurs when a prospective buyer has been shown a property, either  by a sales agent or a home owner and an offer has been accepted.

Who draws up the contract?

In New York usually the seller’s attorney will present the buyer’s attorney with a sales contract. Often they will negotiate the contract before drawing up a physical document. However, anyone involved in the sale of the property can present a contract. It is valid and legally binding if both parties agree to sign it.

What does a contract usually state?

They can be as simple or as complex as is required. The simpler ones act as a memorandum of sale. The more complex ones may include the deposit amount, and legal proceedings should a contract be broken. All contracts will usually reference the address of the property, the sales price, deposit amount and the closing date.

The language used for different types of dwellings will differ. A condo, co-op, multi-unit and single family home will all have contracts specific to them. Equally, residential and commercial properties will also have differing language. Also, a property that needs renovating may also have different language from one that doesn’t.

Broadly speaking properties that are being purchased “As Is”, ie in their current condition, without any contingencies (without the need for inspections or mortgages etc) are simpler contracts than those with contingencies. The latter may have an addendum attached to reflect the details of the contingencies.

Do I make a deposit before or after signing a Contract of Sale?

Once a sales price and deposit amount is agreed, a deposit check is submitted by the the buyer’s attorney with a fully executed contract.

Do I do an inspection before or after signing a Contract of Sale

Traditionally an inspection is done after a contract is signed and a deposit made. However, it all depends on what the seller is willing to allow. In a buyer’s market a seller may be willing to allow the buyer to inspect the property after verbally agreeing on a sales price but before a contract has been executed and a deposit made.

Also, if the property being sold is a single family home, condo or co-op, a seller may be more willing to allow an inspection before a contract is signed. However, if the property is a multi-family and there are tenants in the units, an owner may be less willing to disturb them without a signed contract and a deposit.