Understanding your sale and purchase agreement

By Craig Catley

The open homes are over, and offers are being made on your North Shore property. Your real estate agent will draw up a sale and purchase agreement to be signed by both you and the buyer. This is a legally binding document, so it's incredibly important that you understand exactly what you're signing.

Your real estate agent will provide an in-depth guide to your sale and purchase agreement, but here are a few things worth keeping in mind throughout the process.

The sale and purchase agreement is a contract

As a legally binding contract, the agreement is designed to protect both you and the buyer, and provide certainty in the sale. Setting out terms and conditions in writing creates a solid record that can be referred back to should any disputes arise.

Your sale and purchase agreement is negotiable by both you and the buyer. Make sure the agreement clearly states the required deposit, and the amount of interest the buyer must pay on any overdue payments. 

Your real estate agent will facilitate your negotiations and update the written document accordingly. All amendments to the agreement must be initialled by both parties. It's strongly recommended that you have your lawyer look over your agreement to assess its conditions.

Your agent will facilitate negotiations with the buyer until a mutual agreement is met.

Not all sales are unconditional

The buyer may set conditions of purchase. Conditional offers are common in property sales, and mean that certain requirements must be met before a sale can be completed. Here are some of the usual conditions you'll find in your sale and purchase agreement:

  • Finance or sale of another home – the buyer may be waiting on the funds to complete the purchase of your house. Usually this mean they are waiting on a home loan, or are still trying to sell their previous home.
  • Professional inspections – the buyer may insist on a number of inspections before finalising a purchase. A valuation report will estimate the value of your property on the market, and is often required by lenders. A building and/or engineer's report determines the condition of the building and the section, checking for flaws that may affect the value or livability of the property.
  • Documentation checks – the buyer's lawyer will likely carry out a title search on your property to ensure that you are the owner, and that no one else has any claim over it. It's also common that a Land Information Memorandum (LIM) will be requested from the council, detailing permits, consents, and planning on the property.
  • General obligations – clauses in the agreement will generally allow the buyer access to the property in order to inspect it. Make sure your property stays insured until the settlement date, in the rare case any damage occurs and the conditions aren't met.

Completing the sale

Once all aspects of the sale and purchase agreement have been signed off by both you and the buyer, the sale can continue. The buyer will pay the deposit amount to your agent. Once the sale becomes unconditional, the agent will deduct their commission from the deposit and the remaining deposit will be paid to you.

On the day of settlement, the buyer will pay you the full amount and take ownership of your property. Neither you nor the buyer may change your mind about the sale once it has become unconditional.

Selling real estate can feel like a convoluted process, but an agent will make the whole experience much smoother. If you're thinking of selling and want an agent to represent you, Ray White Takapuna is here to help.

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