PP Guide No.11: What to look for in a Sales Agreement?
A sales agreement can be a very intimidating document and while you are trusting your attorney to ensure that the terms and clauses don’t jeopardize your interests its best to read it thoroughly yourself and look out for key points in it.
This point speaks to the length of time you have to close the transaction from the second you sign it. You need to confirm whether the “days to close” refers to calendar or business days. The time difference could be substantial. For example in 2019 January 1st to March 31st which is 90 calendar days is only 62 business days as this excludes Saturdays Sundays and Holidays. Just so that there is clarity on both side be sure to have your attorney confirm the definition of a day.
This to some degree would have already be handled in the offer letter as it details who pays what but its prudent to ensure that what you expected to pay is clearly mentioned here. Sometimes a clients definition of net that they communicated to their agent can mean something entirely different to the attorney. For example the a client tells an age this is what I want to net the agent knows that they should expect to pay their taxes out of that number the mentioned. But often times when a seller say that is what I want net they mean that is what I want after all fees are paid, a term known in the real estate industry as “net net”. Maybe it’s the Bahamian thing to mention things twice to really convey the thought, we would say, “I hungry hungry or tired tired”, but in any event clarify that every is doing what you expect them to do. Read the agreement to determine that the seller is paying their own legal fee, that each party is equally sharing the stamp tax and most importantly as will almost always be the case that the seller is responsible for the payment of the real estate commission.
If you are expecting to obtain financing you want to be absolutely sure that that agreement notes that the offer is subject to financing meaning that in the event the bank determined that you cannot obtain financing for whatever reason that you can be entitled to a full refund of the funds vested as a deposit. If you don’t ensure this clause is present and worse if its not there you are saying that whether I obtain financing or not my deposit is not refundable. Customarily a sales agreement would include a twenty-one (21) day subject to financing clause which binds you to make the seller and their attorney aware of your ability to obtain financing. If you don’t notify that selling side that you haven’t obtains financing it will be assumed that you have gotten approval. This is another reason why it is important to have your ducks in a row so as to avoid putting your deposit as risk.
Most sales agreements have segment that speaks to the forfeiture and loss of funds under certain circumstances, usually after you have passed the financing period you ave noted your ability to close the transaction but for some reason you can’t maybe the bank is taking forever to pay out or the attorney is moving slow in the preparation of documents the banks need. This clause is there to stay and once you stay within the confines of what is contracted you should be alright but it’s important to know what it says and what you need to avoid.
These are the major items worth considering in a sales agreement for a buyer and should keep you clear of any unfortunate legalities. Losing your deposit could be the most hurtful experience in your entire life so pay special attention the advice here. Now we move into stage three, financing and how to make this happen successfully.