An advance or deferred purchase agreement is a legal contract that allows a buyer to secure a property at a future date with a predetermined price. This type of agreement is often used in real estate transactions where the buyer wants to purchase a property, but is unable to do so immediately for various reasons.
In an advance purchase agreement, the buyer pays a portion of the purchase price as a deposit, which secures their right to purchase the property at a future date. The price is typically fixed, meaning the buyer is protected from price fluctuations that may occur in the market before the purchase is made. This type of agreement is beneficial to buyers who want to secure a property before it becomes available to the public, or before prices rise.
On the other hand, a deferred purchase agreement allows a buyer to purchase a property at a future date with a price that is determined at the time of purchase. This type of agreement is often used when the buyer is not ready to make the purchase immediately, but wants to secure the property at a fixed price. This type of agreement is beneficial to buyers who want to take advantage of a good deal but may not have the means to purchase the property at that time.
There are several benefits to using an advance or deferred purchase agreement. For buyers, it allows them to secure a property at a fixed price and protects them from market fluctuations. It also gives them time to save money or arrange financing before the purchase is made. For sellers, this type of agreement can provide a guaranteed sale and a steady income stream.
However, there are also risks associated with advance or deferred purchase agreements. For buyers, if the property value decreases in the future, they may end up paying more than the property is worth. There is also the risk of the seller reneging on the agreement or selling the property to another buyer. For sellers, if the buyer defaults on the agreement or is unable to complete the purchase, the seller may incur legal expenses to recover the property or the deposit.
In conclusion, an advance or deferred purchase agreement is a legal contract that allows a buyer to secure a property at a future date with a predetermined price. This type of agreement can provide several benefits to both buyers and sellers, but there are also associated risks. It is important for both parties to fully understand the terms and risks of the agreement before entering into it. As with any legal contract, it is advisable to seek the advice of a lawyer before signing an advance or deferred purchase agreement.