What is a Purchase And Sale Agreement?
A Purchase and Sale Agreement (typically referred to in the shorthand ""PSA"" or ""P&A""), is an agreement between a buyer and a seller of real estate property, company stock, or other assets.
The person or company acquiring, receiving and purchasing the property, stock or assets is referred to as the ""Buyer"" and the person or company disposing, conveying and selling the stock or assets is referred to as ""Seller"". The PSA will set out the various rights and obligations of both the Buyer and Seller, and may also require other documents be executed and recorded in the public records, such as an Assignment, Deed of Trust, or Farmout Agreement.
In the oil and natural gas industries, a PSA is the primary legal contract by which companies exchange oil and gas assets or stock in an oil and gas business entity, for cash, debt, stock, or other assets
What Should A Purchase and Sale Agreement Contain?
The specific items in this contract vary by state, but will almost always include the following:
Final Sale Price: This is the purchase price agreed upon by the buyer and seller. Note that this price might change during negotiations before the closing date. For instance, if the buyer’s home inspection turns up a problem with the home, the buyer may be able to negotiate a reduced purchase price.
- Earnest Money Details: The P&S will include information on the earnest money deposit, such as the dollar amount and instructions for making the deposit. In most areas, the buyer will need to deposit a personal or cashier’s check within one to three days of mutual acceptance. The check will be held by a neutral third party until the completion of the deal.
- Closing Date: On your closing date, the purchase will be completed; the transfer of property will be recorded with the local government, and the seller will receive the money for their home. Usually, you’ll sign all the necessary paperwork a day or two before your closing date. Your closing date may change, however, due to unforeseen events, such as your financial paperwork taking longer than expected.
- Title Insurance Company: Information about your title company will be included in the P&S document. As the buyer, you always have the right to select a title company, though it may be local custom for the seller to choose. You should talk to your agent or attorney if you have any questions about choosing a title company
- Title Condition: The P&S will include an agreement that the seller will provide a clear or marketable title of ownership to the buyer.
- Contingencies: Contingencies are conditions that must be met in order for the home purchase to be completed. If one of these contingencies are not met, the sale may be canceled by the buyer or seller. Here are some examples of common contingencies — but be careful — never assume that these contingencies exist in your contract. Always check with your agent or attorney.