An Agreement of Purchase and Sale is the legally binding contract between a buyer and seller that locks in a home's price and terms. If you are financing the home, mortgage lenders strictly require a fully signed copy of this document before granting final approval.
What is an Agreement of Purchase and Sale?
An Agreement of Purchase and Sale is a legally binding contract between a home buyer and a seller. It outlines the terms, conditions, and price of the real estate transaction. Think of it as the official roadmap for buying a home; once signed by both parties, it commits both sides to finalizing the deal, provided certain conditions are met.
Why Do I Need a Purchase and Sale Agreement?
This document is the cornerstone of any real estate transaction in Canada. You need it for two primary reasons:
Legal Protection: It ensures both the buyer and seller are legally obligated to fulfill their side of the deal (e.g., the seller hands over the keys, the buyer pays the agreed price).
Mortgage Approval: If you are financing your home, lenders will always require a fully executed purchase and sale agreement. A mortgage underwriter cannot issue a final approval without reviewing this document to verify the purchase price and property details.
Regional Differences Across Canada
While the concept is the same nationwide, the exact paperwork and terminology vary by province:
Ontario: It is standardly called the Agreement of Purchase and Sale (often using OREA Form 100).
British Columbia: It is typically referred to as a Contract of Purchase and Sale (CPS).
Alberta: Real estate agents use a standardized Residential Real Estate Purchase Contract.
Key Components of the Agreement
Before you sign, ensure your agreement contains these vital pieces of information:
The Purchase Price: The exact amount the buyer is offering.
The Deposit: The amount of money put down upfront to show "good faith" (usually 1% to 5% of the purchase price).
Conditions (Clauses): Standard clauses that allow the buyer to walk away if they can't secure a mortgage, if the home fails a property inspection, or if the home doesn't appraise for the purchase price.
Closing Date: The official day the money changes hands and the buyer gets the keys.
Pro-Tip: Never sign a purchase and sale agreement without having a real estate lawyer review it first. Once signed, backing out without a valid condition can result in losing your deposit or facing legal action.
[Downloadable] Purchase and Sale Agreement Checklist
Make sure your document includes the following before sending it to your mortgage lender:
[ ] Full legal names of all buyers and sellers
[ ] Correct legal description and municipal address of the property
[ ] Final, agreed-upon purchase price
[ ] Clear deadlines for all conditions (financing, inspection, etc.)
[ ] Clear lists of fixtures included (e.g., appliances, lighting) and excluded
[ ] Signatures and initials from all parties on every single page
Example of an Ontario Agreement of Purchase and Sale document.
