Just because you thought you went out as a buyer only, you just carried with you some pennies. And on the other hand, just because you thought you are only selling, you just carried with you a pad of receipts. You are wrong. Well, technically speaking, you can. But not in a big transaction like when you buy a house and lot, or a real estate, or probably business establishments.
When you want to purchase a property, it comes with it a purchase agreement. In many of your purchases, at a grocery store, in a boutique shops. or when eating in a restaurant, you will never encounter a seller asking you to enter into an agreement for buying their goods or merchandise, or services. You just have to pay for them, and they will give you a receipt and maybe some change. But, they will never ask you to sign a contract for the purchase that you have made, and availed.
The most obvious reason is, they are a trivial stuff. Not they are not important, in fact, they can be expensive. But buying a real estate is one big thing. It is very serious matter, and it involves a lot of considerations, including the legal aspects. In contrast to just eating a restaurant, or buying some goods a convenience store, the seller or the business owner, would not really care about other things. All they care is that, you will buy, they get some profit, and you will enjoy the product. In a real estate, a house or a land, a property, the responsibilities are too heavy, and we are not yet talking about the amount value.
But an agreement or a contract in a property does not work like receipts. In fact a contract is given and made even before the buying transaction is made. An agreement or a contract works like an invoice. No, it is different from an invoice. But what makes a contract work like an invoice? (Again, a contract is not an invoice). But let us just make a review as to what an invoice is (like).
What is An Invoice?
An invoice is a commercial documentation provided by the seller to its buyer before the he (the buyer) commits to buy. It indicates what the buyer is about to buy, and how much he is paying. But an invoice is not a receipt. It is more of an informative documentation rather than a legal one.
But it can be misleading as an invoice may look just like a receipt. In fact, a lot of people mistake an invoice from a receipt. But there is also a sad truth that businessmen themselves and our government agencies are the ones starting the confusion. This is not a local problem, in some states, and in some countries, there is actually a confusion on the use of an invoice.
Back to purchase agreement, like an invoice, it is to be given when the prospective buyer decides to buy the item. But of course, it can be given right during the purchase of the item. It is not a receipt that confirms that the buyer has paid something for the purchase that he has made, although it sounds like that. So what then is a purchase agreement? Also, it is not like an invoice, in that, there are obligations to be considered in a Sales and Purchase Agreement, or SPA.
What is a Purchase Agreement?
A purchase agreement or sales purchase agreement is legally bind agreement between the buyer and the seller, outlining the terms of the sales, such as the price, the item to be purchases, the names involved in the purchased, the dates, and some other information that may be useful for future reference.
Terms in a Purchase Agreement
Why Purchase and Sale Agreements are Important in Real Estate Transactions
Buying a property is a serious thing. By serious, we mean to say, it involves legal obligations. It is not jut about the amount involved in it, because they are usually expensive, but because it involves not just the seller and the buyer, but all the people in the locality where the property is located. When you buy a property, you are not only buying a property from the seller, buy you are actually, buying piece of land, a property, from that particular area. And when something or someone is involved, it calls for some common grounds, as to how a transaction should be executed.
But more than that, an SPA or a sale and purchase agreement can double as a receipt. In a sale and purchase agreement, the signatures in both parties are very evident and noticeable. Hence, an SPA is a strong and valid document to be used as reference in case there might be things needed to be settled in the future.
But in buying a real estate, a house, a home, a small residential building, a lot, there is always a risk. There is a risk that the transaction may have some missing entries that should have been part, or should have not been part of the sale – any clerical errors. In such case, both parties can always have somewhere to go back to.
We have mentioned how risky an SPA is. One of this is when the buyer backs out. But it should have been already in the agreement. What would you do, as a seller, if the buyer backs out in the middle of the agreement? Most of the backing out issues are due to a buyer not being approved of a loan. Such scenarios, the seller should already know. Well, if you have made and signed the agreement already, but the purchase has not been made, then there is no complication in the real sense. It is like a prospect buyer in a mall inquiring about a certain product, but would not actually buy. The cons is that you have prepared the documents already. But that is just part of the seller’s job. And there is no crime legally speaking if someone backs out.
If the purchase has been made, with a payment, probably a down payment, then that is quite a challenge. Depending on the seller, you can make your own terms, such as having no return of the partial payment. But whatever you prefer, it should be written in the document. But that is up to you. This is a very crucial part, and so, it is important that the buyer should have full knowledge with regards to the payment methods before diving deep into the waters. It is important that you give the buyers a brief, not just a marketing of the product.
And speaking of back out, that is part in the section of the contingencies of sale. But what is a contingent of sale? A contingent of sale means that the property has been accepted both by the seller and the buyer, but it hast to wait for some criteria to be met in order for the sale to be final. This is the case in which both the seller and the buyer have to wait, and while waiting, the buyer may decide to back out. This is a common case and nothing to be worried. It is just a part of the selling. As mentioned, the most common reason is when the buyer had to wait includes waiting for loan approval.
In some cases, the seller is the one backing out after the sales and purchase agreement has been made and signed. And more so, if the buyer has already paid. If this happens, the seller risk the chance of being ramified for the breach he has committed. In such case, that is up to the buyer if he needs to push thru for some further actions. Some reasons would be that the seller has deep connections with the house, and realized that he has some attachment into it.
But if you are the buyer, will you sympathize with the seller? Or would you push thru with the signed agreement? If you enforce the agreement, you can ask assistance from the court, and it would not be too difficult for you to win the case because there is an official documentation to back you up. You will probably win in the end. But at the same time, if you sympathize with the seller, he could just return to you the deposit, the earnest money, or the down payment, and end the story. That is just on your part. For the seller, it is not the end of it.
For the seller backing out the signed agreement, it means that he can be sued by the marketing agents. The marketing agents were responsible for the sale of the property. And they have spent some amount of money and effort for its marketing. What the seller can do is just give them the commission they were supposed to receive for the sale of house. But even then, there is already a scar, a breach on the part of the seller. And that may affect the conditions should he decide to sell the same property again.
That is how important the purchase agreement form is. Without a purchase agreement form, it would be too easy for either party to compromise on the deal, on the spoken agreement. But the signed, written agreement made it more stronger. An purchase agreement without a written document would have made the seller compromise the deal, without fear of being sued. But because of the legal, official document, with signatures from both party, it will just give the deal more chance to be successful.
But a signed written agreement is not only useful for a purchase agreement, or sales purchase agreement, it is also important and useful for any kinds of agreement.