In NH, we typically use a purchase & sale agreement as the first step of an offer. That differs from MA where the Letter of Intent or Offer to Purchase start the process. Here are some of the basics of the NH Purchase & Sale Agreement.
Here's an expanded version of each section of the New Hampshire Purchase & Sale Agreement (P&S), along with examples to illustrate how they work in real-life scenarios:
1. Parties Involved (Section 1)
This section identifies the buyer and seller, including their names and addresses. Both parties are agreeing to be part of this transaction. For example, John Doe, a buyer, and Sarah Smith, the seller, are entering a legally binding agreement where John will purchase Sarah’s property.
2. Property Information (Section 2)
This section specifies the location and legal description of the property being sold. It ensures both parties are on the same page about what is being bought and sold. For example, John is buying a single-family home at 123 Main Street, Conway, NH. The legal description helps avoid any confusion about which property is involved, especially if it shares a lot or boundary with another.
3. Purchase Price and Deposit (Section 3)
This outlines the purchase price and earnest money deposit required. It breaks down the timeline for the buyer to submit the deposit, typically held in escrow. For instance, if John agrees to buy Sarah’s house for $350,000, he may provide a $5,000 earnest money deposit to show he’s serious. This deposit is held by the real estate firm until closing.
4. Deed and Title (Sections 4 and 9)
This section discusses the type of deed the seller will provide, typically a marketable title free of encumbrances. It also outlines the title examination process. For example, when John buys Sarah’s house, the title company will ensure there are no outstanding liens or claims on the property, like unpaid taxes, before the transaction can be completed.
5. Transfer of Title and Closing Date (Sections 5 and 6)
This defines when the title will transfer to the buyer and the agreed-upon closing date. It also confirms that full possession of the property will be transferred to the buyer at closing. John might agree to close on Sarah’s property on December 15th, and by that date, Sarah must vacate the home, leaving it in "broom clean" condition for John.
6. Representation and Dual Agency (Section 7)
This section clarifies whether the buyer and seller are each represented by their own agent or if a dual agent represents both. For example, if Sarah’s agent is also representing John in the transaction, both must agree to dual agency to avoid any potential conflicts of interest.
7. Insurance (Section 8)
The seller is required to maintain insurance on the property until the sale is finalized. If a fire or flood happens before closing, the insurance payout can either repair the damage or allow the buyer to back out. For example, if Sarah’s house suffers fire damage a week before closing, John could either accept the insurance payout or walk away from the deal and get his deposit back.
8. Prorations (Section 10)
This section handles the proration of taxes, utilities, and other property-related costs. It ensures the buyer and seller pay their fair share of expenses up to the closing date. For example, if closing happens halfway through the year, Sarah will pay property taxes for her time in the home, and John will cover the remainder of the year.
9. Property Inclusions and Disclosures (Sections 11 and 13)
Here, the agreement specifies what fixtures and personal property are included in the sale, such as appliances or built-in shelving. It also notes the receipt of property disclosures. For example, Sarah agrees to include the refrigerator and washer/dryer in the sale, and John has already reviewed the disclosure about the 10-year-old roof.
10. Radon, Arsenic, and Lead Paint (Section 12)
This section explains the risks and testing options for radon gas, arsenic, and lead paint. Buyers are encouraged to test for these hazards. For example, if John is buying an older home, he might order a lead paint test to ensure it’s safe for his young children.
11. Inspections and Contingencies (Section 14)
The buyer can conduct various inspections, such as for the home’s condition, pests, water quality, or radon levels. If issues arise, the buyer can negotiate repairs or cancel the deal. For instance, if John’s home inspector finds a leaking roof, John could ask Sarah to repair it before closing or adjust the sale price.
12. Due Diligence (Section 15)
The buyer has the right to review any easements, restrictions, or condo documents. If anything is unsatisfactory, they can terminate the agreement. For example, if John learns through due diligence that Sarah’s property is subject to a restrictive covenant prohibiting fences (but John wants to install one), he could back out of the deal.
13. Financing and Financing Contingency (Section 18)
This section outlines whether the agreement is contingent on financing, meaning the buyer must secure a loan for the purchase. If John can't obtain a mortgage by a specific date, he can back out of the deal without losing his deposit. However, if John doesn’t inform Sarah in time, he risks forfeiting his deposit.
14. Wire Fraud Alert
This section warns about the increasing risk of wire fraud during real estate transactions. For example, before John wires his down payment to Sarah’s escrow agent, he must call the office to verify the bank account details, ensuring it’s not a scam.
15. Additional Provisions and Addenda (Sections 19 and 20)
This section includes any extra provisions or addenda that are part of the deal. For example, if John and Sarah agree on additional items like a home warranty or specific repair obligations, they’ll be noted here.
16. Choice of Law and Venue (Section 21)
This clarifies that any legal disputes will be governed by New Hampshire law, and any lawsuits will be handled in New Hampshire courts.
17. Effective Date and Notice (Section 22)
The effective date is the date when the last party signs the contract and communicates that to the other party. All deadlines in the agreement are counted from this date. For example, if Sarah signs on November 1st and John signs on November 2nd, the effective date is November 2nd, and any deadlines (such as inspection periods or financing) are counted from there.
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