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The Agreement of Purchase and Sale (Part 2)
We left off in Part 1 after discussing deposits and scams to skim interest from those deposits.
Continuing through the agreement, right under the section on deposits comes a line in bold print stating that the rest of the purchase price will be paid as set out in Schedule A.
It's important to make sure Schedule A is actually attached, and that the payment details are included!
The Irrevocable Period
Next we come to Paragraph 1. This is where the Buyer declares how long they will stand behind this particular offer. A specific date and time must be given, and the time until that date is called the irrevocable period.
If the offer is accepted within the irrevocable period, it is binding.
Withdrawing an Offer
However, there is some confusion among agents and Buyers as to whether an offer can be withdrawn if it has already been presented, but not yet accepted.
Typically, when the Buyer signs the offer, their agent will inform them that they are signing “under seal”, which means they are making a solemn promise not to withdraw the offer during the irrevocable period.
(Wax seals have gone out of style. Nowadays you only get a boring, pre-printed seal on the Agreement.)
The reason for signing under seal is that the Buyer has not been given any “consideration&rdquo (material compensation) for their promise not to withdraw the offer.
If the Buyer is given consideration, a regular signature would be sufficient.
I used to carry a dollar that I would give to the Buyer as consideration, then ask if they would give it back as a gift so I could use it next time. This used to get a chuckle out of most clients, but one actually kept it!
Completion Date (Paragraph 2)
In Paragraph 2 we have the completion date, which is the date when the parties will exchange money for ownership.
Once the exchange is complete, the Seller must give the Buyer vacant possession of the property by a specific time of day. The time is written in the agreement, and is usually no later than 6:00PM.
Unfortunately, many people are confused about this simple clause.
Many Buyers believe that once the lawyers have registered the title, they have the right to move into the house immediately.
Meanwhile, many Sellers believe they have until midnight to move out, since the day ends at midnight.
This often leads to confrontations, sometimes even physical ones. Added confusion comes from the fact that the lawyer's office has given the Buyer the key earlier in the day.
However, just because the Buyer has the key, doesn't mean they have the right to use it!
Notices (Paragraph 3)
Paragraph 3 is where the Buyer legally appoints their Brokerage to give or receive notices relating to the Agreement on their behalf, and the Seller does the same for their Brokerage.
These notices generally relate to conditions being waived or fulfilled, but could include any information that must pass between the parties.
Digital Notices and Fraud
Notices must always be in writing, never verbal.
However, a recent change allows for the signature on a fax or e-mail attachment to be considered an “original” signature, so faxed and e-mailed notices are now as good as notices written on paper.
In my opinion, this is a fraud risk. Forging a written signature is difficult. However, forging a signature in a fax or e-mail attachment is easily accomplished with cut-and-paste and can be difficult to detect.
A special situation comes up when the same Brokerage works for the Buyer and the Seller. (This is called multiple representation.)
In this case, the Brokerage is not allowed to give or receive notices on behalf of the Buyer or Seller, since it would be giving notice to itself.
Instead,the agent must deliver, fax, or e-mail the notice to the recipient, who must sign (with date and time) that they have received it.
This series will continue in June 2013.
Want to know more about the Agreement of Purchase and Sale? Just ask me, I'll be happy to help.