Sales Agreement: What Does It Mean In Selling A Property?

A memorandum of sale has another term popularly used in selling a property called a memorandum of understanding or sales agreement. It is a written document that outlines the key terms and conditions of the sale of a house or property between a buyer and a seller. It served as an initial agreement before the formal contract (the sales contract or purchase agreement) was drafted and signed.

Importance of sales agreement

The sales agreement is a crucial document in any real estate transaction. Its importance lies in the protection and clarification it offers both the buyer and the seller. Here are some key reasons why a sales agreement is essential:

Legally binding contract
Defining terms and conditions
Property disclosures
Contingencies and conditions
Timelines and deadlines
Dispute resolution
Protecting financial interests
Finality of the sale

The sales agreement is a critical document in a real estate transaction, providing legal protection, clarity, and peace of mind to both the buyer and the seller throughout the process.

What does the memorandum cover?

The memorandum of sale includes the following information:

Parties involved. It is the names and contact information (buyer and seller).
Property details. A description of the property being sold, including its address and any relevant identifiers (title number or land registry details).
Purchase price. The agreed-upon price of the property to sell.
Deposit. The amount of money a buyer agrees to pay as a deposit to secure the property. The amount is a percentage of the total sale price.
Special conditions. Any specific terms or conditions agreed upon by both parties, such as property inspection requirements or any inclusions or exclusions in the sale (furniture or appliances).
Timeline. The expected timeline for the completion of the sale, including the target date for exchanging contracts and completing the transaction.
Financing. If the sale is subject to mortgage financing or any other financial arrangements, it may be outlined in the memorandum.
Legal disclaimers. It may include provisions stating that the memorandum is not legally binding until a formal contract is executed.

The memorandum of understanding is not a legally binding contract itself. But it serves as evidence of the initial agreement between the buyer and seller. After the memorandum of understanding is signed, the buyer typically proceeds to arrange financing and perform any necessary property inspections. Once all the conditions in the memorandum are satisfied, a formal sales contract is drawn up, and both parties sign it to finalize the sale.

It is essential to consult with legal professionals, such as real estate attorneys or licensed conveyancers, to ensure the sales process complies with all applicable laws and regulations.