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Purchase AgreementThe purchase and sale agreement (PSA) are the agreement that finalizes all terms and conditions in the buying/selling of a company as originally stipulated in the letter of intent (LOI). When the shares of a company are bought/sold, the PSA is a share purchase agreement (SPA). When only the assets of a company are bought/sold, then the PSA is an asset purchase agreement (APA). This final document is binding, and is usually completed after all buyer and seller due diligence has been finalized, as neither side can turn back once the agreement is finalized and executed. The purchase agreement is a long legal document that includes:1
Real Estate Closing Research Paper4Legal names and addresses of the buyer and seller;Definitions of terms used throughout the agreement;The kind of transaction (i.e. share or asset purchase);The purchase price and type of consideration paid (i.e. cash, vendor take back financing, consideration shares, etc.)Adjustments to the purchase price (i.e. a reduction in the purchase price if the working capital threshold is not delivered);Payment terms, milestones and deadlines (i.e. if a contingent consideration payment exists such as an earnout, this section would stipulate how and when the payment is made);Long-term liabilities assumed by the buyer (if any, in case of a share transaction);Representations and warranties made by the buyer and seller;Post-closing rights and obligations for both parties;Dispute resolution and arbitration protocol; andThe closing date, location and signatures page.A definitive purchase agreement is used to formally transfer the ownership of a firm irrespective of the size of the firm. It documents the final mutual understanding reached by the buyer and the seller.The signatures of the buyer and the seller are witnessed and the supporting papers such asthe inventory list, tangible assets list, bill of sale, etc., are enclosed with the definitive purchase agreement. Three basic categories of purchase agreements exist for the documentation of a real estate sales. The categories are influenced primarily by legislation and court decisions addressing the handling of the disclosures and due diligence investigations in the marketing of properties. The three categories of purchase agreements are for:1.One-to-four-unit residential property sales transactions;1
Real Estate Closing Research Paper52.Other than one-to-four-unit residential property sales transactions, such as for residential and commercial income properties and owner-occupied business/farming properties; and3.Land acquisition transactions.Within each category of purchase agreement, several variations exist. The variations caterto the specialized use of some properties, the diverse arrangements for payment of the price, and to the specific conditions which affect a property, particularly within the one-to-four-unit residential property category.