Important differences in concepts

[LandCo]

Important differences in concepts.

The Offer to Purchase versus the Option to Purchase and Sale Agreement.

So many clients (and brokers sometimes) usually make the mistake to think a simple offer to purchase is the same as an Option to Purchase and Sale Agreement.

The Offer.

The offer to purchase is more like an intentions letter, usually drafted by the broker in which a potential buyer makes an offer to the seller and the seller accepts making a small payment, always around five hundred to one thousand dollars, of course it all depends on the value of the property.  This is a simple document, one page, without formalities.  It is only to secure the first negotiations in a real estate transaction for five or more days.

This document, while executed in good faith, it will become hardly valid and/or enforceable, especially if it is written in a very simple way (to small, no signatures authenticated, etc).

Though it is a good way to secure a deal for some days, it is always recommendable for the parties to enter in what it is usually called the Option to Purchase and Sale Agreement.


The Option to Purchase & Sale Agreement (OP&SA)

This document is executed by the buyer’s attorney and it is deemed to be valid and legally enforceable for the parties with the formalities that are necessary in case of troubles in the future.

It has to have at least the following clauses:

1.   Legal description of the appearing parties.
2.   Legal description of preliminary concepts.
3.   Legal description of the property.
4.   Payment schedule and reimbursement schedule.
5.   Escrow Agreement clause (only if applicable).
6.   Title inspection period (only if applicable)
7.   Title Due diligence period.
8.   Closing Date indication.
9.   Notifications.
10.   Date of signature.

It is important to mention, that this document has to be executed in two copies, exactly the same for evidentiary purposes, one for the seller and one for the buyer, both copied duly authenticated by a notary public.

The OP&SA has to actually describe from A to Z the complete scheme of the deal, so in the future, no misinterpretations are made by anybody, seller or buyer, or their attorneys!

While is almost impossible to foresee all troubles, it is better to keep the parties well known about the deal so everything goes smooth at the closing table.

And do not forget the GOLD RULE: DO NOT SIGN ANYTHING UNTIL YOU ARE ADVISED BY YOUR OWN LAWYER.   Do not let the rush impulse you to make decisions, specially in Real Estate.

Have a nice closing!

All the best,

Lic. Francisco Molinero Hernández                                                                                             
LandCo®
Real Estate Legal Services
Attorneys at Law
Costa Rica
Tel:   +(506) 232-4000
Lexincorp Menu Ext. 207
Fax:  +(506) 232-2589
E-mail:    fmh@landcolaw.com
Website: www.landcolaw.com