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Okay, so last month, I had a first-time buyer in Louisville who almost signed their PSA without reading it. I just picked up a pen and was ready to go. They wanted to move forward because the house was perfect and the price was right. I understand.
But here's the thing: The PSA is like a map that shows you how to buy the house. And I say "basically" because it really is everything. You wouldn't just get in your car and drive across the country without checking to see if you have gas, would you?
That example is actually bad because I did that once when I was driving to Nashville and had to call AAA at 2 a.m. But whatever.
The National Association of REALTORS® 2024 Home Buyer and Seller Generational Trends Report says that the median home price for first-time buyers reached $240,000 in 2024. That's a lot of cash. Like, more money than most people will ever spend on anything, except maybe college if you went to one of those expensive private schools, which I didn't, but that's a whole other story.
Let me break this down. Once you and the seller agree on a price, a purchase and sale agreement is made. It's not just a handshake; it's a legal document that spells out every detail about how the sale will go. From earnest money to what happens if the inspection finds problems. We learned in my Master’s of Social Work (MSW) program how important it is for any relationship to have clear agreements. And what about buying a house? Definitely counts as a relationship.
So, the answer in the book is that all PSAs have the same format. But each one really tells its own story.
The property information section needs to be very clear about the physical address, legal description, lot size, and any special features that are included. I've seen deals almost fall through because the PSA didn't say if the fancy chandelier was going to stay or go. It's a true story. The Consumer Financial Protection Bureau's guide for home buyers says that vague property descriptions can cause problems.
Being specific is important.
The PSA writes down the agreed-upon sales price. But that number isn't always the last one. Let's go through an example.
You agree to pay $350,000 for a house. The appraisal says the house is worth $330,000.
Oh no.
Most conventional loans require the purchase price to be equal to or less than the appraised value, according to Fannie Mae's Selling Guide. This gives you the power to negotiate again.
Here's the math:
• Price at first: $350,000
• Value: $330,000
• Your 20% down payment is $70,000 (based on the original price)
• You need a loan of $280,000.
• The most money a bank will lend you is $264,000, which is 80% of the appraised value.
• The amount you need to make up is $16,000.
Not going to lie, this is where buyers freak out. But the PSA usually has a clause that protects you in case of an appraisal. You can ask the seller to lower the price to the appraised value, split the difference, or take your earnest money and leave.
You show you're serious by putting down earnest money. You pay a deposit, just like when you rent a car, and if everything goes through, that money goes toward the final costs.
The National Association of REALTORS® says that earnest money is usually between 1% and 3% of the purchase price.
For that $350,000 house:
Low end (1%): $3,500
The average is $7,000 (2%).
High end (3%): $10,500
Hold on, I need to do that middle one again. Yes, $7,000 is correct.
The PSA tells you exactly how much earnest money you need, when it's due, and who will keep it. Usually, a title company or third-party escrow agent.
Everything starts with the closing date. The Mortgage Bankers Association's 2024 Origination Insight Report says that the average time to close in 2024 was 44 days, up from 42 days the year before.
A lot of things happen between signing and closing. A check of the house. Search for a title. Evaluation. Underwriting a mortgage. The PSA says when each one is due.
Did you miss one? You might be breaking the law. That would be very stressful.
From the first day, we work with buyers at AmeriSave to set clear deadlines. Our online tools help you keep track of deadlines so nothing gets missed.
The PSA tells you about the title company that will handle your deal. Their name, address, and what they do are all listed. The title company usually keeps your earnest money in an escrow account and does the title search to make sure the seller has the legal right to sell.
The American Land Title Association says that about 25% of real estate deals have title problems. There are a lot of problems, from mistakes made by clerks to heirs who don't tell anyone they own the property.
Twenty-five percent! That's 25%.
The PSA says who pays for title insurance, which usually costs between $500 and $3,500 depending on the value and location of the home, according to HUD closing cost data.
Your PSA makes it clear how the title changes hands and gets insured. Buyers typically purchase an owner's title insurance policy protecting them for as long as they own the property. The lender needs their own policy, which the buyer usually pays for.
I know it seems like you're getting insurance for everything right now. But title insurance is one of those things that can really help you avoid a lot of trouble.
Last year, I worked with a couple. They found that the home's foundation had a lot of cracks during the inspection. To fix it, it will cost $40,000.
If they hadn't had an inspection contingency, they would have either lost their earnest money or had to buy a house with major structural issues.
The contingency gave them three choices. Talk to the seller about fixing it. Take the cost of repairs off the price of the item. Or leave with your deposit back.
Some common contingencies are appraisal protection, the right to inspect, and getting financing approved.
The FHA needs appraisals on all FHA loans. For the loan to go through, the home must be worth at least the purchase price.
Most of the time, home inspection contingencies give you 7 to 10 days after you sign to have a professional look at the house. The American Society of Home Inspectors says that the average cost of a home inspection is between $300 and $500, but it can save you thousands.
I've seen inspections find everything. Mold. Bad wiring. The roof was damaged in a way that you couldn't see from the ground.
If your mortgage application is denied, financing contingencies will protect you. Even though you got preapproved, the final underwriting can sometimes show problems. At AmeriSave, we help buyers understand exactly what underwriters need so there are fewer surprises.
These are extra papers that come with the standard PSA. Some are optional depending on the property's situation, while others are required by law.
Septic inspection addendums are often needed for properties with septic systems. Some properties with well water might need to have their well water tested.
The Environmental Protection Agency says that about 13 million homes in the US get their drinking water from private wells.
Lead paint disclosures for homes built before 1978 are another common addendum. Required by the EPA at the federal level. The seller must tell you about any known risks of lead-based paint. Buyers have ten days to check for lead paint.
I'm doing that inspection if I'm buying a house built before 1978. All the time.
Closing dates need to change sometimes. The seller's new home might not be ready yet. Or there is a problem with the loan processing. The closing date extension addendum lets both parties agree on a new date without breaking the whole contract.
For real. It's so annoying that people use these words interchangeably because they mean different things.
After you accept an offer, you sign a purchase and sale agreement. It tells you what to do from accepting the offer to closing. The purchase agreement is the last thing you sign on closing day to make everything official.
The Consumer Financial Protection Bureau (CFPB) says that the final purchase agreement is the end of all contingencies and the legal transfer of property ownership. That’s also what the Real Estate Settlement Procedures Act (RESPA) says.
Look at it this way. PSA is the list of things you need to do to get to the finish line. The purchase agreement is the last step.
PSAs are very different from state to state. Can be anywhere from four to nine pages or more.
Some states make lawyers write PSAs. Some people let real estate agents take care of them. The National Association of REALTORS® says that in some states, it is normal or required for lawyers to be involved in residential real estate transactions. Not very common in other places.
It's not just about how many pages there are. Different disclosures are needed.
When you think about it, this is pretty interesting. How much does the legal culture in a certain area affect something as basic as buying a house?
If you search for "purchase and sale agreement for your state," you can find general PSA templates online. LegalZoom and Rocket Lawyer are two companies that offer state-specific templates.
But.
A PSA is a legally binding agreement that usually involves hundreds of thousands of dollars. The National Association of REALTORS® says that the median price of an existing home reached $407,100 in early 2025.
Would you use a YouTube video to learn how to do surgery on yourself? Not likely. (Last week, I did watch a YouTube video about how to fix my garbage disposal, and it worked out okay, but that's not the same thing.)
Templates are a great way to see what PSA looks like. Use them to learn. But when it's time to sign, make sure you do it with a qualified real estate attorney or licensed agent who knows what your state needs.
We at AmeriSave think that buyers who know more make better choices. One of the most important things you can do before buying a home is to fully understand your PSA.
Once you and the seller sign the PSA, you are both legally bound to follow the terms of the contract.
The Uniform Commercial Code, which governs business transactions in most states, says that signed contracts make promises that must be kept.
If you try to back out without using the contingency, the seller can sue you for damages or make you finish the purchase.
Here's a situation. You sign the PSA. Find a house you like better three weeks later. If you refuse to close without a good reason, you will probably lose your whole earnest money deposit.
Depending on the laws in the state and the terms of the PSA, the seller may be able to sue for more damages.
Contingencies are the right way for you to get out. If the home doesn't appraise, the inspection finds major problems, or the financing falls through, you can usually get your earnest money back and walk away. As long as you stick to the rules and deadlines set out in the PSA.
Before you sign, you have time to talk about changes. Not after.
You're stuck once those signatures are on the page.
The purchase and sale agreements are the most important parts of the whole home buying process. Once you sign, you are legally bound to follow the terms of the contract and finish the purchase.
Your contingencies are very important ways to protect yourself. Appraisal, inspection, and financing contingencies are all valid ways to get out of a contract if something goes wrong. But only if you stick to certain rules and timeframes.
Just because you love the house doesn't mean you should skip the inspection. In a competitive market, don't give up your appraisal contingency unless you're 100% sure you can cover any gaps that might come up.
Requirements in each state are very different. Hire professionals who are familiar with the laws in your state. At AmeriSave, we help you feel sure about how to deal with these complicated papers.
The buyer usually signs first when they make an offer. The seller looks over the document after the buyer signs it. If the seller agrees to all the terms exactly as they are written, they sign and the PSA becomes legally binding. But if the seller wants to change any of the terms, such as the price, closing date, or contingencies, they will sign a counteroffer instead. The buyer then gets the counteroffer back. This back-and-forth can go on for several rounds until both sides agree on the same terms. A PSA is only binding when both the buyer and seller sign the same version. The National Association of REALTORS®' 2024 Member Profile says that in competitive markets, the average number of counteroffers in negotiations has gone up to 2.3 rounds. Signing the order makes it clear who made the offer and who accepted it, which is important legally if there are any problems later. These days, most real estate agents use digital signature platforms, which makes it much easier to keep track of who signed when than when they used to fax documents back and forth. I remember when we used to send everything by fax. Half the time, the fax machine would run out of paper or get stuck, and we'd have to start over.
Most of the time, the seller pays the real estate agent's commission, which includes preparing the PSA. The seller's agent or buyer's agent usually fills out the first PSA using standard forms from the state real estate commission or the local REALTOR® board. Forms have changed over the years to protect both parties and follow state rules. But in some states where lawyers are usually involved, either the buyer's lawyer or the seller's lawyer could write the PSA, and that cost would be billed separately. The American Bar Association says that when lawyers are involved, preparing a PSA usually costs between $500 and $1,500. The buyer never pays the listing agent directly for preparing the PSA, but they do pay them indirectly through the purchase price because the seller's proceeds at closing must cover the agent's commissions before the seller gets the net amount.
PSA doesn't include a lot of important financial information that comes later because it focuses on the structure of the transaction. PSA doesn't list any closing costs other than the earnest money deposit. The lender must give you this detailed list of costs on the Closing Disclosure form at least three business days before closing, as required by the Consumer Financial Protection Bureau's TILA-RESPA Integrated Disclosure rule. PSA doesn't list specific closing costs like origination fees, appraisal fees, title insurance premiums, recording fees, and prepaid property taxes. PSA also usually doesn't include all the loan terms, like the interest rate, the monthly payment amount, or whether you're getting a fixed-rate or adjustable-rate mortgage. The loan estimate and final loan documents have those details. Items that are not permanently attached to the house, like furniture or appliances, are either covered by a separate bill of sale or listed in PSA addendums.
Yes, PSAs are contracts that courts will enforce, so they are legally binding. Once both parties sign the PSA, it makes legally binding promises in all fifty states. If either the buyer or the seller doesn't keep their end of the deal without a good reason, the other side can take legal action. The party that didn't break the contract can file a lawsuit asking the court to order the other party to finish the deal. They can also sue for money damages to make up for their losses. The Legal Information Institute at Cornell Law School says that courts often order specific performance in real estate cases because each property is unique and money damages aren't enough. It's important to read every word before signing because PSA is legally binding. Just because you changed your mind doesn't mean the courts will let you out of your contract. You need a good reason based on the contingencies that are spelled out in the PSA.
There is no separate expiration date for the PSA because it is linked to the closing date in the contract. Most of the time, PSAs give you 30 to 60 days from signing to closing, but this can change. The Mortgage Bankers Association says that in 2024, the average time from signing a contract to closing on a purchase was 44 days. But some of the conditions in the PSA do have specific time limits. Your inspection contingency might give you ten days to finish the inspection and decide if you want to go through with it. An appraisal contingency might give you 20 days to finish the appraisal and go over it. Usually, a financing contingency means you have to get final loan approval within 30 to 45 days. You might lose the protection that a contingency gave you if you don't do anything by the deadline. Some PSAs say that the buyer has to remove contingencies by a certain date, after which they are committed to closing even if problems come up.
The role of attorneys in PSAs varies widely from state to state, depending on the legal customs in that area. In states where lawyers are required, real estate lawyers are common for all home sales. In these states, an attorney usually writes or reviews the PSA, negotiates the terms, does or oversees the title search, and closes the deal. The American Bar Association Section of Real Property, Trust, and Estate Law says that attorney fees for full representation in home purchases range from $1,500 to $5,000. Real estate agents usually prepare PSAs using standard forms in states where lawyers aren't required. Title companies or escrow officers usually handle closing. People in these states can still hire lawyers if they want legal advice, but it's not common. Some states are in the middle, where lawyers aren't required but are common in complicated cases.
You might not think this happens very often. The answer depends entirely on whether your PSA covers the issue as a contingency. Your inspection contingency protects you if the roof needs to be replaced and costs $15,000. You can ask the seller to fix the roof before closing, lower the price by $15,000, or cancel the contract and get your earnest money back. You usually have a set number of days after the inspection to decide, which is usually between 5 and 10 days. If your appraisal comes in low, your appraisal contingency gives you choices. If your loan application is denied, your financing contingency lets you back out of the contract without penalty as long as you applied for financing in good faith. But if something goes wrong that isn't covered by the contingency, you usually still have to close. For instance, if you just decide you don't like the neighborhood or move to a different city, those aren't good reasons. Zillow's Consumer Housing Trends Report 2024 says that about 5% of home purchase contracts fall through between signing and closing.
Yes, but only if both sides agree to the change in writing. You and the seller have made a legally binding contract when you sign the PSA. You can't change the terms on your own. Any change needs to be agreed upon by both parties and documented through an amendment or addendum. Some common changes are moving the closing date back, changing the purchase price based on what the inspection found, and changing who pays what closing costs. Your PSA says the closing date is November 15, but on November 1, the lender tells you that underwriting will take an extra 10 days. You would ask the real estate agent to make a closing date extension addendum that moves the closing date to November 25. This addendum is only valid if both you and the seller sign it. The seller doesn't have to agree. They could say no and stick to the original date of November 15. But most sellers will agree to reasonable extensions instead of letting the deal fall through.
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