From the preparation to the document signing, here’s everything you need to know about a Sales and Purchase Agreement.
If you are new to the property market and are scouring for your dream home, you will eventually have to learn about the nitty-gritty of actually sealing the deal, especially pertaining to documentation. Arguably, the most important document for a prospective buyer and seller, other than loan-related documents, is the Sale and Purchase Agreement (SPA).
As a beginner, you may be overwhelmed by all the documentation coming your way. To ease any concerns you may have, we have listed a few common questions and answers (Q&As) related to SPA for prospective home buyers. Hopefully, this will set you on the right path to secure your new home.
What is an SPA?
The SPA is a comprehensive legal document that contains details of the property transaction between the buyer and seller. Once you sign off on the SPA, you essentially get the ball rolling to seal the deal.
Who prepares the SPA?
Typically, the buyer and seller will engage a professional conveyance lawyer who specialises in property to prepare the SPA. Even if you are legally knowledgeable, this is advisable to avoid any unnecessary technical delays or errors by either party which, may prove costly. Normally, the lawyer is appointed by the seller, but it has to be mutually agreed by both parties.
What is in the SPA?
The SPA contains comprehensive details of the contract between buyer and seller. These include purchase price, conditions and precedents, payment terms, loan details, delivery of vacant possession, defect liability period and other relevant information on the property. It will also contain the course of action if either party fails to meet the requirements stated in the SPA, for example, the deadline for the buyer to receive keys to the property.
What are the different types of SPAs?
For residential property, the SPAs are split into two different types: primary property (direct purchase from developers) and secondary property (purchased in the sub-sale market).
The main difference between the two is that SPAs for the primary property is pretty much fixed and skewed towards the developer, while SPAs for secondary property allow some room for negotiations between buyer and seller.
Is the SPA binding?
Yes, the SPA is a legally binding contract and enforceable in the court of law. Once you have signed off on the SPA, no further negotiations are normally allowed. This will protect the interest of both buyer and seller. You have to be 100% certain before signing that document.
Is it possible to cancel the SPA?
Yes, either party may cancel the SPA, if the terms and conditions stated in the document allow it. The SPA may contain certain clauses that may penalise either buyer or seller, depending on the situation. The SPA may consist of a specific performance clause, for example, delivery of vacant possession or payment during a specific duration. If these clauses are breached, it may lead to the possible cancellation of the SPA.
What is the difference between SPA and sale deed?
The SPA is basically an agreement to buy/sell a property at a future date. On the other hand, a sale deed is a legally binding document proving that the seller has transferred absolute ownership of the property to the buyer. With the sale deed, the rights and interests in the property are acquired by the new owner. The property is immediately transferred, unlike the SPA where there is typically a waiting period for transfers.
A sale deed usually includes details of the buyer and seller, property description, selling price, mode of payment, time frame for transfer of property title, delivery of possession and indemnity clause.
Is the SPA valid after-sale deed?
A sale deed transfers the rights of a party with a property to another party. All the terms and conditions in the SPA are usually valid in the sale deed.
How much is the cost of SPA and Stamp Duty in 2020?”
The cost of SPA and stamp duty may vary according to the relevant details of the property, especially its price. For reference, the cost of SPA and stamp duty is estimated at 3-4% of the total purchase price of the property. And if the typical 10% down payment is taken into consideration, then the cost is 13-14% of the total purchase price of the property.
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