What Are the Differences Between Offer to Purchase, Promise to Sell, Sales Agreement, and Private Agreement?
The Offer to Purchase, the Promise to Sell, and the Sales Agreement**
The offer to purchase, the promise to sell, and the sales agreement are three ways to establish a preliminary agreement for a real estate transaction, commonly referred to as “pre-contracts.” They are all limited in duration; if one of the parties fails to sign within the specified timeframe, the agreement becomes void. Otherwise, the contract is finalized through an official deed of sale. The amount of fees owed to intermediaries must be clearly stated in these agreements.
These three contracts are considered “private agreements,” meaning they are written and signed by the parties involved. The term “private agreement” is often used to describe a sales agreement. These agreements are established at the very beginning of the legal sales process. Their differences lie in the obligations of the parties and the conditions for terminating the commitments.
The Offer to Purchase
The buyer submits a written offer to purchase (also called a price offer). Once the seller accepts and signs the offer, they are legally bound, and the terms are directly transferred into the sales agreement.
The purchase offer comes with a relatively short deadline, often 5 to 10 days, during which the seller can either accept or decline the offer.
Offers to purchase can include contingency clauses, which may be related to:
- Obtaining a loan,
- The condition that the zoning certificate does not reveal major easements that could decrease the property’s value,
- Obtaining a building permit (for purchasing land).
In new property sales, there is a variation known as the reservation contract. The developer or marketer of the new real estate program agrees to reserve a unit at a fixed price specified in the document in exchange for a security deposit.
The amount of this deposit, typically between 2% and 5% of the sale price, depends on the time between the reservation signing date and the start of construction. The longer this period, the lower the deposit amount. No deposit is required if the period exceeds two years. The deposit is held in escrow and cannot be paid directly to the seller.
Thus, if the buyer fails to obtain a loan (a contingency clause), they can withdraw without penalty, and the seller must refund the entire security deposit. However, the contingency clause must not allow the prospective buyer to withdraw simply by refusing to apply for the loan.
Additionally, if the developer fails to complete the project, the security deposit will be refunded.
Learn more about the refund of the security deposit in the case of a reservation for a new off-plan property.
The Promise to Sell
It is an agreement in which the seller reserves the property for the buyer for a limited period (usually two to three months). During this time, the seller is prohibited from withdrawing from the sale or selling the property to another person.
At the end of this period, or if the conditions outlined in the promise to sell are met, an official deed of sale can be signed. The terms specified in the promise to sell will be incorporated into the final contract.
The promise to sell places significant obligations on the seller, who must specify not only the sale price but also essential details about the property’s condition, allowing the buyer to make an informed decision. These details may include (consult a professional for advice specific to your case):
- Proof of property ownership,
- Easements and zoning regulations,
- Mortgage status,
- Rental status,
- Details related to the condominium association (if applicable), including the condominium bylaws, financial information, planned maintenance work, etc.,
- Energy, water, sanitation, and pool safety equipment,
- Required inspections for termites, dry rot, and asbestos if the property is in a designated area (this applies to termites on the Basque-Landes coast but not to dry rot).
Some of these elements are required for listing the property.
The seller must also commit to maintaining the property in the condition observed at the time of signing the promise to sell. Renting out the property is not allowed unless agreed upon with the buyer.
The seller is fully committed by the promise to sell.
To be legally binding, this contract must be registered with the tax office within 10 days of signing. The buyer is responsible for paying the registration fees, which is often why this contract is less commonly used compared to the sales agreement, which is free of charge.
The Sales Agreement
When the seller and buyer agree on the transaction, they sign a sales agreement (also known as a bilateral promise to sell), outlining the terms of the sale. This is the most commonly used agreement in real estate transactions as a commitment to the sale.
Unlike the promise to sell, the sales agreement does not need to be registered with the tax authorities.
It generally includes the same elements as the promise to sell, along with the buyer’s commitments.
Signing the sales agreement requires the buyer to pay a security deposit, usually 5% of the sale price, which will be deducted from the total amount during the signing of the notarial deed. This contract is considered a final agreement on “the property and the price” since the terms specified in the sales agreement will be included in the official deed of sale.
The date for signing the final notarial deed is set in the sales agreement. The average time between the two signatures is approximately three months.
This contract, like the promise to sell, includes a mandatory 10-day withdrawal period for the buyer.
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