Describe the Purchase and Sales Agreement and how it differs from an
Option Agreement

Dear fener,

You asked to describe the Purchase and Sales Agreement and how it
differs from an Option Agreement.

According to “The Mortgage Corner of New England,” which can be found
at –

http://www.tmcofne.com/tmcpurchasecorner.purchasesales.htm

“A purchase and sales agreement is a written contract signed by the
home buyers and home sellers stating the terms and conditions under
which the property will be sold.”

I like this definition, because it is concise and to the point. 
However, there is far more to a Purchase and Sales Agreement than can
be covered in such a brief definition.

The Purchase and Sales Agreement needs to include information that is
critical to the proper execution of the transaction -
·	The offering price proposed
·	The closing date for the transaction
·	The official address of the property under consideration
·	A legal description of the property under consideration
·	The time allotted for response to the offer
·	Designation of selected title and escrow companies
·	Signature areas for both the buyer and the seller
·	Addendums (e.g. finance, inspection, lead paint, utility,
contingency and miscellaneous items not covered elsewhere)

When executing a purchase and sales agreement, one should consider
several issues and definitions that may prove to be contentious in the
future.  Some such issues include the address of the property, its
legal description, the purchase price stated in the contract, the
earnest deposit, various contingencies (e.g. commitment, closing and
inspection contingencies), and any addendums.

An Option Agreement grants the party to whom it is given the right
(but not an obligation) to buy a piece of property (residential or
commercial) under terms and conditions stipulated in the Option
Agreement at the time it is signed.  Depending on the agreement
between the seller and the potential buyer, the Option Agreement may
convert into a Sales and Purchase Agreement at the time the
transaction is executed – or a separate Sales and Purchase Agreement
may be negotiated and drafted at that time.

The Purchase and Sales Agreement is a contract that, once signed,
transfers ownership of the property from the seller to the buyer.  An
Option Agreement, on the other hand, does not involve a transfer of
ownership – it merely provides a potential buyer the right to purchase
the property under the terms and conditions stipulated in the
agreement.  It may or may not be convertible into a Purchase and Sales
Agreement.

I hope this response adequately addresses your request.  Please let me
know if you are in need of additional information concerning this
query.

Thanks,
ragingacademic


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