What Is an Agreement of Sale?

An agreement of sale begins as a proposal from a buyer to purchase a property from an owner for a set price contingent on all the terms and conditions shown. If the owner agrees to sell the property for the price shown including all the terms and conditions – there is a “meeting of the minds”. Should the owner then sign (execute) the agreement - then the proposal becomes a binding contract.

In the real world of real estate there usually are negotiations until buyer and owner agree on everything stipulated in the proposal. After several rounds the buyer changes the original proposal to include all the changes agreed and then initials and DATES each change. The owner has the original document why not have the owner make the changes then return the document to the buyer and save a step?

Who Has Control?

The owner relinquishes control when the owner signs the agreement. The owner has to have reasonable assurance the buyer will be able to complete the transaction and the price, terms and conditions are satisfactory. The owner, therefore, must be the final reviewing authority.

This is quoted from page 11 of the PAR agreement of sale: “WHEN SIGNED THIS AGREEMENT IS A BINDING CONTRACT. … Return of this agreement, and any addenda and amendments, including return by electronic transmission, bearing the signatures of all parties, constitutes acceptance by the parties.”

Now the control of the transaction changes to the buyer. The Buyer must initiate and approve all actions for the contract to progress, and has several options to terminate the contract. The owner may terminate the contract only if the buyer defaults per the terms of the contract.

What If…

Buyer signs the agreement and the owner delays the signing? The agreement calls for a deadline for the owner to sign or the agreement is not valid. Should the owner receive and sign another agreement within the deadline, the owner will return the buyer’s earnest money deposit and the agreement is never a contract. Buyer will return to looking for another house.

What is Covered in the Agreement?

The PAR agreement of sale has 27 different paragraphs and 641 lines. We will examine each for your basic understanding. I have divided the agreement into four (4) different parts:

• Part 1 is identification of all parties and description of the property.
• Part 2 is the Mortgage Contingency
• Part 3 is contingencies and verification of condition.
• Part 4 is default, mediation, release, communications and special clauses.
• Part 5 is the acknowledgment, signatures, delivery and notices.

Please remember - REALTORS® ARE NOT LAWYERS!!!

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