}
Property sales contract

Tips on Reading a Property Development Sales Contract

author

By Elie Douna

Jul 27, 2023

When buying or selling a property, one of the most crucial documents you will encounter is the property sales contract. This contract, also known as a Contract of Sale or Real Estate Purchase Agreement, outlines the terms and conditions between the buyer and the seller. While these contracts can be dense and filled with legal terminology, understanding them is essential to a smooth transaction. Here’s how you can read and understand property sales contracts.

1. Understand the Basics

The Contract of Sale outlines the terms of the property sale, including the property’s details, the price, and the rights and obligations of both parties. It becomes legally binding once both the buyer and the seller sign it. It typically contains the following components:

  • Parties: The legal names of the buyer(s) and seller(s).
  • Property Details: Full address and description of the property.
  • Price: The agreed-upon purchase price.
  • Settlement terms: The date when ownership will officially change hands.
  • Deposits and Payments: Details of any deposits required and the schedule for remaining payments.

2. Read the Fine Print

It’s essential to read the contract thoroughly, as it will include specific terms and conditions that affect your rights and obligations. These may include:

  • Cooling-off Period: This is a period during which the buyer can change their mind and cancel the contract. The length of this period varies by jurisdiction.
  • Contingencies: These are conditions that must be met before the sale can proceed, such as obtaining financing or a satisfactory home inspection.
  • Penalties for Breach: Penalties if either party does not fulfill their obligations under the contract.
  • Encumbrances: Details of any mortgages, easements, or other encumbrances on the property.

3. Look for Special Conditions

Special conditions are specific to your contract and can significantly influence the transaction. These could include clauses about repairs to be made by the seller, or the sale being contingent on the buyer selling their current home.

Property sales contracts are legal documents that can have significant financial implications. It’s always wise to seek legal advice before signing. Lawyers can help clarify confusing terms and spot potential issues that you might overlook.

5. Don’t Rush

Take your time to read and understand the contract. Buying or selling a property is a significant transaction, and it’s essential to ensure you’re comfortable with all the terms and conditions before signing.

Remember, a property sales contract protects both the buyer and the seller by outlining everyone’s rights and obligations. By understanding its terms, you can ensure a smooth transaction and avoid potential legal complications.

Please note that while this guide provides a broad overview, every contract of sale is unique. Always consult with a professional to ensure you fully understand your contract.

This article does not provide legal advice. Always consult a legal professional before entering into a contract of sale.

6. Familiarize Yourself with the Language

Legal documents often use specific jargon, which can be confusing. Make a point to familiarize yourself with common terms such as “caveat”, “encumbrance”, “conveyancing”, “lien”, etc. Understanding these terms can make the contract easier to navigate.

7. Get Familiar with Local Laws

Property laws can vary significantly from one location to another. Make sure you understand your local laws, especially those relating to property transactions. These can impact your rights and responsibilities, how disputes are resolved, and the penalties for contract breaches.

8. Ensure Accuracy of Information

Before you sign the contract, ensure that all the details included are accurate. Check the names, addresses, and the property description. Incorrect details can cause legal issues down the line. Make sure that all agreed-upon terms, including price and contingencies, are recorded correctly in the contract.

9. Know Your Exit Strategies

While you enter into a contract of sale with the intention to see it through, unforeseen circumstances may arise. Understand the conditions under which you can legally exit the contract, including cooling-off periods, and clauses related to inspection results, financing approval, or sale of your existing home. Knowing your potential exit strategies can offer peace of mind.