An Agreement of Purchase and Sale, once signed, and once all of the conditions (for example, financing and home inspection) have been waived or fulfilled is a binding contract between the buyer and seller which cannot be changed unless both parties agree to do so. Usually, if one party wants a change to the Agreement, it is to benefit that party, to the detriment of the other, in which event the other party will not agree. Many people believe that conditions (for example, financing and home inspection) are absolute “escape” clauses allowing the buyer to terminate the Agreement of Purchase and Sale for any reason (including “buyer’s remorse”), but this is not the case. A financing condition allows a buyer to terminate the Agreement of Purchase and Sale if he does not qualify for financing. No matter how friendly your banker may be, if you qualify for financing he will not assist you in terminating the Agreement by delivering to you a letter stating that you do not qualify for financing if in fact you do. He won’t do this as his reputation, creditability and job will be on the line. Similarly, a buyer cannot terminate an Agreement of Purchase and Sale based on a home inspection clause if there’s only a minor defect unless the home inspection clause has been specifically drafted to so provide.
To avoid these problems, it is critical that your Agreement of Purchase and Sale be reviewed by a lawyer before you submit it to the other party or you should instruct your real estate agent to insert a condition in the Agreement of Purchase and Sale which allows you to terminate the Agreement based upon your lawyer’s approval of all of the contractual terms and conditions. This advice applies to both buyers and sellers.
It’s easy to see from the foregoing that a legal review of your Agreement of Purchase and Sale before it becomes unconditional is essential.
For more information on Agreement of Purchase and Sale, contact Jay Teichman today.
