Real Estate 101: The Agreement of Purchase and Sale
By ZARAH WALPOLE
I am a dirt lawyer. This means my legal practice includes residential real estate. There isn’t a lot of glamour in this area of law. What I like about it though, is that I get to help real people buy their homes. For most of us, buying a home is the largest purchase we will ever make. It is a busy, stressful, exciting purchase. Not only is there a great deal of money tied up in the purchase of a home, but home ownership usually involves the fulfillment (and often compromise) of dreams, and the purchase of a sense of security and stability. Given all this, I thought I would pass on a little legal information that many new home buyers don’t seem to be aware of.
You’ve found your dream home – maybe it is a resale, maybe it’s a new home in a subdivision that still only exists as an empty plot of land and in an architect’s floor plan. You’ve got an agreement of purchase and sale in front of you. It sets out the price, and the closing date. You’re excited and you’re ready to sign.
Here is what I want you to understand. Once you sign that Agreement of Purchase and Sale, you are committed to buying the house. Even if the closing date is two years away and you still have three deposits to make, you have bought a house. Unless certain narrowly defined events occur (such events are listed in the Agreement of Purchase and Sale), you are committed to buying the house. You cannot change your mind.
I make this point because an increasing number of people have been sending me copies of their Agreement of Purchase and Sale, saying they don’t want to buy the house after all and asking if they can get out of the deal. Most of the time, I have to say no. Without exception, my clients have been extremely surprised (and upset) at the answer. Please understand. The Agreement of Purchase and Sale is a legally binding contract – it is not just a statement of intention.
In my practice this problem most often arises when people are purchasing a new home and the closing date is very distant. People’s lives can change a great deal in 6 months or a year. Typically in such agreements, although the builder can extend the closing date by up to 120 days, once the occupancy certificate is ready, you had better have your financing in place and be ready to close.
What can you do to avoid this problem? I recommend that you actually read the entire Agreement of Purchase and Sale before you sign it. If you don’t understand what any of the provisions mean, ask your lawyer to review and explain. If some of your obligations seem unreasonable, see if the seller is willing to change them. It is important that you understand exactly what you have agreed to when buying a home. Please don’t just take the sales agent or your real estate agent’s verbal summary of the agreement as the final word on the topic.
Nope, real estate law isn’t glamorous. But it sure is important. I think I’ll leave the glamour work to others.
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The above is not intended to constitute
legal advice. Please contact a lawyer to clarify your
legal rights.
