What Is A PSA In Commercial Real Estate?

08/03/2012
Many people looking to get into the fantastic career of commercial real estate have asked what a PSA is. A PSA is just an abbreviation commercial real estate agents and brokers use for a “Purchase & Sales Agreements” To further explain what a PSA is, and how the documents is drafted in order to protect all parties during the transaction in the purchase and sales of commercial real estate properties is fairly simple, but extremely vital component in all commercial real estate transactions.

“A real estate contract is a contract for the purchase/sale, exchange, or other conveyance of real estate between parties. Freehold (“More permanent”) is the conveyances of real estate covered by real estate contracts, including conveying fee simple title, life estates, remainder estates, and freehold easements. Real estate contracts are typically bilateral contracts (i.e., agreed to by two parties) and should have the legal requirements specified by contract law in general and should also be in writing to be enforceable.” Source: http://en.wikipedia.org/wiki/Real_estate_contract

There are several aspects to a PSA (Purchase and Sales Agreement) that must be included in all contracts in order to make them legally binding and enforceable. Below are a list of those items, and a brief explanation to each.

MANDATORY PURCHASE AND SALES AGREEMENT REQUIREMENTS:

• Identification Of The Parties: The full and legal name of the parties involved must be included in the PSA. In the purchase and sales agreement, the parties involved are referred to as the seller(s) and buyer(s) or Principles.

• Identification Of The Property: The address and/or APN# of the property (Assessor’s Parcel Number) must be included in all PSA’s.

• Consideration: The Purchase Price of the commercial real estate in questions. Consideration is considered something of value bargained for in exchange of the real estate. Money is the most common form of consideration, but other consideration of value, such as other property in exchange, or a promise to perform (i.e. a promise to pay) is also satisfactory.

• Principle Signatures: All commercial real estate contracts must be entered into voluntarily (not by force), and must be signed/executed by the Principles, to be legally enforceable.

• Have Legal Purpose: The purchase contract would be considered invalid if it calls for either party to perform an illegal action.

• A Meeting Of The Minds: Each party/principle to the commercial real estate transaction bilaterally agrees to the terms and condition outlined in the PSA (purchase and sales agreement)

• Closing Date: A traditional commercial real estate purchase contract must specify a date by which the closing must occur. The closing is the event in which the money (or consideration) for the real estate is paid and the real estate is conveyed from the seller(s) to the buyer(s).

In addition to the mandatory requirements for a legally and binding purchase and sales agreement, there are other items that will customarily negotiated within the contract by the principles such as;

• Deposit Amount
• Books and Records & Physical Inspection Contingency Timeframe
• Commissions
• Property Condition
• Credits
• Title & Escrow Preferences

Once these mandatory PSA conditions have been fulfilled and only after both parties have agreed to the terms and conditions of the PSA(purchase and sales agreement), will you have a legally binding and fully executed PSA, which is often referred to as an “Offer & Acceptance”

Good Luck:

CURBSTREET.COM

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