You’ve searched for several months and finally found a home that you love in a great neighborhood. After negotiating with the seller, you agree on a price that you both agree on. You sign a contract, put down a deposit, and finally sit down at the closing table to complete the transaction — or, as it’s called in real estate jargon, close a contract of sale.
But what does a contract of sale include? What if certain terms and conditions come with your home purchase?
Here’s everything you need to know about sales contracts, what they entail and the timeline for making them.
What is a contract of sale?
A bill of sale, also known as a bill of sale, real estate purchase agreement, or real estate purchase agreement, is an agreement between a buyer and seller that governs the terms of a real estate transaction. As the name suggests, it is a contract for the purchase of a property.
In addition to basic information such as the address and price of the property, the document often contains all the contingencies that must have occurred before the sale becomes binding and sets out what rights the buyer has in relation to the seller’s obligations and vice versa. For example, if the sale is conditional on a satisfactory home inspection, this would be mentioned in the purchase agreement. Typically, contingencies have a specific time frame in which they must be met.
Although the name is similar to a purchase and sale agreement (PSA), the bill of sale or contract is generally signed upon closing. “Typically purchase and sale contracts are drafted earlier in the process. Buyers, sellers, or both must meet certain contingencies before a contract is formed and a transaction is completed,” says Christine Finch Oleynick, broker at Keller Williams Luxury Realty. That being said, the bill of sale is sometimes used interchangeably with PPE.
What should a sales contract contain?
The information listed in a bill of sale may vary by state, but typically includes:
|Buyer and Seller names||The legal names of all parties involved in the transaction who have held or will hold title to the home.|
|property information||The property address, square footage and property information.|
|Pricing and Financing Information||The final purchase price of the home and the amount of the mortgage, if any, taken out by the buyer for the purchase.|
|ownership date||The ownership date: when the buyer can take ownership.|
|Deadline||The date when the transaction is completed and the house officially changes hands.|
|Inclusions/Exclusions||Any furnishings that the seller wishes to leave behind, e.g. B. washing machine/dryer or oven, as well as any important items/furnishings that he takes with him.|
|Significant cash deposits||Amounts that indicate the good faith of the buyer are usually paid into an escrow account.|
|closing costs||Any closing costs required and who will pay for them.|
|contingencies||The contingencies that must be met before a transaction is completed. Common contingencies include home sale, home inspection, appraisal and financing. Contingencies often have a set time frame. For example, a buyer may need to secure financing by a certain date.|
What is not regulated in a sales contract?
While the bill of sale provides a fairly comprehensive summary of a real estate transaction, you probably won’t see a specific breakdown of fees in this document.
For example, if you want to see what’s included in your closing costs, you probably need to look at your billing or closing statement, which you usually receive a few days before closing. You will probably only see the final number on the bill of sale.
How binding is a sales contract?
If a seller or buyer fails to meet a contingent condition within the specified timeframe, it is possible to withdraw from the sale.” But once the contingencies are negotiated and settled, the attorney drafts a purchase agreement. Once the buyer and seller sign that bill of sale, it’s a binding agreement,” says Oleynick, “however, it’s important to ask your realtor or closing agent about the specific process in your state, as it can vary depending on where you live.”
Make no mistake: Despite the innocent-sounding “agreement,” this is an official contract. Backing out of a purchase agreement (or even a PSA) can be difficult for either party, and it could cost them money. Buyers who feel buyer remorse are likely to lose any serious money deposits to the sellers, and sellers who are in doubt could face legal action from the buyers.
Timeline of the purchase agreement
While the process and time it takes to buy a home can vary by state, here’s what you can expect:
- The buyer’s real estate agent prepares an offer letter once the buyer finds a home they wish to purchase.
- The seller’s agent shares the offer with the seller. Typically, sellers will either accept, decline, or make a counteroffer within a day.
- If buyer and seller decide to negotiate a price, it can take a few days.
- If the buyer and seller negotiate successfully, a purchase contract is drawn up. Both parties usually have 10 to 14 days to sign it after an offer is accepted.
- Once signed, the house is “under contract” or “in contract”. At this point, the buyer has approximately 30-45 days to secure financing; The seller has this time to clear the house.
- If contingencies are specified in the purchase and sale, both the buyer and seller must have met them within the specified timeframe, or both parties could withdraw from the transaction. For example, buyers may have one week to 10 days to schedule a home inspection.
- About three working days before the closing, both the buyer and the seller receive a copy of the concluded purchase agreement and a closing statement or settlement statement – a kind of cost balance sheet – from the closing agent.
- On the closing day, the purchase contract is signed by both parties and the house sale is complete.