Agreement of Sale

What is an Agreement of Sale?

An Agreement of Sale is a written contract that obligates a buyer to purchase and a seller to sell real estate under mutually agreed-upon terms and conditions. The agreement typically includes key details like the sales price, property description, payment terms, closing date, and contingencies related to financing and inspections.

Examples

Single-family Home Sale: William agrees to buy a single-family home from Lisa for $350,000 under the condition that he obtains a loan for $280,000 at a 5% interest rate.
Commercial Property Transaction: XYZ Corp signs an Agreement of Sale with DEF Inc. to purchase a warehouse for $900,000, pending a property inspection and environmental tests.
Vacation Property Sale: Ella signs an Agreement of Sale to sell her vacation condo to Harriet for $450,000, with the condition that Harriet secures financing within 30 days.

Frequently Asked Questions (FAQs)

Q1: What happens if a buyer fails to obtain financing as stipulated in the Agreement of Sale? A: If the buyer cannot obtain financing, the contingencies in the Agreement of Sale usually allow them to exit the contract without penalty, provided all requirements were met to secure financing.

Q2: Can an Agreement of Sale be modified? A: Yes, both buyer and seller can agree to modify the Agreement of Sale. Any modifications should be in writing and signed by both parties to be legally binding.

Q3: Is an Agreement of Sale legally binding? A: Yes, once both parties sign the Agreement of Sale, it becomes a legally enforceable contract subject to the conditions and contingencies outlined in the agreement.

Q4: Who prepares the Agreement of Sale? A: Typically, real estate agents, brokers, or attorneys prepare the Agreement of Sale to ensure all legal aspects are covered correctly.

Q5: What is included in an Agreement of Sale? A: Key components include property details, sales price, financing terms, contingencies, closing date, and any special conditions agreed upon by both parties.

Offer and Acceptance: A mutual agreement where one party makes an offer, and the other accepts it, forming a contract.
Contract of Sale: Another term for Agreement of Sale, emphasizing the legal obligations created by the contract.
Earnest Money: A deposit made by the potential buyer to show they are serious about purchasing the property.
Closing Date: The date when the transaction is finalized, and the ownership of the property is transferred from the seller to the buyer.
Contingencies: Specific conditions that must be met for the Agreement of Sale to remain binding, such as obtaining financing or satisfactory home inspection results.

Online Resources

References

“Real Estate Principles” by Charles J. Jacobus
“Your First Home: The Proven Path to Homeownership” by Gary Keller
“The Real Estate Agent & Broker Examination” by REA Research

Suggested Books for Further Studies

“The Book on Managing Rental Properties” by Brandon and Heather Turner: A comprehensive guide for property management.
“Real Estate Investing For Dummies” by Eric Tyson and Robert S. Griswold: An encouraging start into real estate investment.
“Real Estate Law” by Gordon Brown and Scott Myers: An in-depth look at the legal aspects of real estate transactions.

Real Estate Basics: Agreement of Sale Fundamentals Quiz

### What is an Agreement of Sale? - [x] A written contract obligating buyer and seller in a real estate transaction. - [ ] A verbal promise to buy or sell property. - [ ] A type of lease agreement. - [ ] A mortgage financing agreement. > **Explanation:** An Agreement of Sale is a written contract where a buyer and seller consent to the terms and conditions of a property sale transaction. ### If a buyer cannot secure financing by the specified date, what typically happens? - [ ] The seller keeps the deposit and cancels the sale. - [x] The buyer may terminate the contract without penalty if a financing contingency exists. - [ ] The buyer must find an alternate lender. - [ ] The transaction continues without any financing. > **Explanation:** Financing contingencies protect the buyer from penalties if they are unable to secure financing, allowing them to exit the contract under specified terms. ### Who creates the Agreement of Sale document? - [ ] Only the buyer - [ ] Only the seller - [x] Real estate agents, brokers, or attorneys - [ ] The mortgage lender > **Explanation:** Typically, real estate agents, brokers, or attorneys prepare the Agreement of Sale to ensure all aspects are legally accurate. ### What is an earnest money deposit in a real estate transaction? - [ ] A final payment for the property. - [x] A deposit made to show the buyer's serious intent. - [ ] The down payment. - [ ] Mortgage insurance. > **Explanation:** Earnest money is a deposit made by the potential buyer to demonstrate their serious intent to proceed with the purchase. ### What term describes the mutually agreed modification of an Agreement of Sale? - [ ] Amendment - [x] Addendum - [ ] Counter offer - [ ] Closing statement > **Explanation:** Modifications to an existing Agreement of Sale are made through addendums, which are additional agreements attached to the original contract. ### Which professionals commonly help in preparing the Agreement of Sale? - [x] Real estate brokers, agents, or attorneys - [ ] Home inspectors - [ ] Mortgage lenders - [ ] Property appraisers > **Explanation:** Real estate brokers, agents, or attorneys typically prepare the Agreement of Sale to ensure its legality and enforceability. ### What does a closing date signify in the Agreement of Sale? - [ ] The start of property negotiations - [ ] The inspection date - [x] The date when the property ownership is transferred - [ ] The loan approval date > **Explanation:** The closing date is when the property ownership is officially transferred from the seller to the buyer, marking the completion of the sale. ### Who needs to sign an Agreement of Sale for it to be binding? - [ ] Only the buyer - [x] Both buyer and seller - [ ] Real estate agent - [ ] The mortgage lender > **Explanation:** For an Agreement of Sale to be binding, both the buyer and seller need to sign the document, thereby agreeing to the terms and conditions. ### Terms related to financing in the Agreement of Sale are meant to protect which party? - [x] The buyer - [ ] The seller - [ ] The real estate agent - [ ] The home inspector > **Explanation:** Financing contingencies within the Agreement of Sale offer protection to the buyer, ensuring they can secure a loan as a condition to completing the purchase. ### If a buyer fails their home inspection contingency, what can they do? - [x] Withdraw from the sale without penalties - [ ] Force the seller to lower the price - [ ] Convert the offer to a rental agreement - [ ] File a lawsuit against the seller > **Explanation:** The home inspection contingency allows the buyer to withdraw from the Agreement of Sale without penalties if the property fails inspection and the issues cannot be resolved.