Buying real estate, especially buying a home, can be a confusing and nerveracking process. It's necessary to get all of the details right before you make what is likely the major investment of your life. Knowing in advance what is involved in negotiating a purchase and sales agreement will help put your mind at ease and help ensure that you will not make mistakes that will be difficult to remedy later.
A purchase and sales agreement is a contract between the buyer and the seller of a property that specifies the terms of the purchase.
The form for a purchase and sales agreement is available online. You can fill it out yourself, but most people would be wise to work with a real estate agent or a real estate attorney. The agreement will first ask for the date, your name, and the seller's name, and the amount you are offering to pay for the property, which may or may not be the price the seller is asking.
In addition, you will state the conditions under which you are willing to pay the purchase price. These conditions will include how long your offer is open, how much you will put in as a down payment, and who will hold your deposit until the deal is done. It's necessary to provide a legal description of the property, specify what items in the house (carpeting, lighting, appliances) you want included in the sale, state that seller must provide a clear title to the property (this is proof that the seller actually owns the property she is selling you), state that the seller is going to pay property taxes, utilities and other expenses until the closing date, when you will own the home, and specify under what conditions your deposit would be returned to you. You need an inspection clause, which says that your offer is good only if the property passes a home inspection, lead paint inspection, radon inspection, and whatever other inspections you deem appropriate. A mortgage contingency requirement is included to say that if you cannot get financing (a mortgage), you can back out of the offer and not lose your deposit. Once you have filled out this information, the purchase and sales agreement goes to the seller.
The seller now has the opportunity to modify the agreement. If you have offered less money for the property than the seller is asking, the seller can accept your offer or counteroffer, naming a price that is somewhere between your offer and the seller's asking price. The seller can also stipulate that the appliance that you asked for are not included in the sale, or that she does not accept that a radon test must be performed. Basically, all of the terms that you have specified are up for negotiation. The seller will make her changes, and the purchase and sales agreement goes back to you for your consideration.
The negotiation process continues until the buyer or seller can agree on all of the terms included in the purchase and sales agreement or until one party decides that the deal just isn't doable. Usually your deposit is not forfeited if you and the seller cannot complete a purchase and sales agreement.
Signing the Agreement
If you and the seller can come to terms, you will both sign the agreement. At that point, the purchase and sales agreement becomes a binding contract. If one of you violates the terms of the agreement, the penalties specified in the agreement can be imposed. For example, if you find a house you like better and decide not to purchase the house on which you have negotiated a purchase and sales agreement, your deposit would be forfeited to the seller.