Purchase and Sale Agreement
What is the Purchase And Sale Agreement (PSA)?
The PSA is a written agreement signed by the buyer and seller that outlines the terms of a real estate transaction. The PSA establishes price, earnest money, closing date, contingencies and any other relevant items. The PSA is very different than the Purchase Agreement.
Purchase and Sale Agreement (PSA) vs. Purchase Agreement:
- The PSA – outlines which terms need to be met for the purchase/sale of the property and starts the closing process.
- The Purchase Agreement – finalizes the sale of the property after the terms in the PSA are met and is signed at the very end of the closing.
What do I need to know and do about the PSA as a buyer or seller?
The PSA outlines the essential features of the transaction. So, first—you should know that while it may seem complicated, the PSA is actually relatively straightforward. Second—you should know that the PSA lays out the following:
- Agreed-upon Purchase Price: subject to change during escrow pending the closing process.
- Earnest Money: how much; when it’s due; who manages it (generally a third-party escrow agent or title company)
- Closing Date: by which the closing process needs to be completed.
- Title Insurance Company / Escrow Company details: name(s); address(es); who pays the escrow fees; and the due date of loan proceeds to the escrow agent. Unless otherwise noted, the escrow company and title company are the same (title companies generally offer escrow services in addition to title services.)
- Title Condition: how the house title is transferred; which party pays for the title policy; and how the title is insured and conveyed.
- Contingencies: clauses that allow the buyer or seller to cancel the deal without financial repercussions (ex: the financing contingency.)
- Addendums: documents optionally added to a standard PSA detailing specific requests from the buyer or seller (ex: a closing date extension.)
And third—you should know the process of offer and acceptance works like this: the buyer will send a signed PSA to the seller with their terms. If the seller accepts, they will sign and send it back. If the seller counteroffers, they will send back a signed counteroffer. And, if the buyer accepts the counteroffer terms, they will sign it.
