Purchase agreements when buying and selling a house: what do they cover?
Whether you’re planning to sell your property or own your own home, having a suitable and correct purchase agreement is critical. Comparis explains what to be aware of when signing a purchase agreement.
04.01.2024
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1. What does a purchase agreement cover?
The purchase agreement for a house or apartment regulates the conditions, at which price and the date on which the property changes hands.
After notarization, the seller must hand over the property to the buyer. The buyer, in turn, is obliged to pay the purchase price in accordance with the terms of the purchase agreement.
The notary usually arranges registration in the land register, with the seller’s signature. Note: without this step, there will be no change of ownership.
2. How broad should a purchase agreement be?
The aim of a purchase agreement is to bind the other party to specific and detailed promises. This way, you avoid unexpected costs when buying your house. Use carefully designed purchase agreements with clearly defined prices and dates as well as planning documents. For new builds or renovations, you should also include detailed building specifications.
Do you know how much your property is worth?
With Comparis, you can find out the approximate value of your property quickly and free of charge online. This gives you a rough estimate and the basis for a more in-depth appraisal by an expert.
3. Who creates the purchase agreement?
The notary creates the purchase agreement according to the wishes of both parties. The buyer and seller must be informed about the wording of the purchase agreement. The notary is neutral, but points out conditions that favour or disadvantage one of the two parties too much.
Are there any uncertainties? If in doubt, consult a specialist, such as a construction lawyer or a client consultant.
Tip: clarify the main points of your purchase agreement before getting in touch with the notary. This way, you avoid any misunderstandings and don’t have to ask for any fundamental changes when the draft purchase agreement is available.
4. Do I need a preliminary contract?
A preliminary contract legally binds the intentions of the buyer and seller. All of the important conditions are usually listed. However, only publicly notarized preliminary contracts are valid. Public notarization is often very expensive.
It can be more cost-effective to draw up a reservation agreement. It records the intentions of both the potential buyer and seller in writing. It differs to a preliminary contract in that there is no public notarization. As a result, these agreements are not legally binding.
5. What should a purchase agreement include?
The purchase agreement must be drawn up in writing. The contracting parties, the object of sale (property) and the purchase price must be listed. In addition, it is useful to include the following provisions in the contract:
Comprehensive information on the contracting parties
An exact description of the property (address, cadastral number)
Precise pricing
Payment conditions and due dates
All relevant appointments
Provisions on tax issues, especially regarding possible property gains tax
Condition of property at handover
Details of installations and building components such as lifts, heating, façades, roof, etc.
Information on any renovation work, wear and tear and defects
For new builds: determination of the reference date
Explanatory report, regulations of any condominium owners’ association
All burdens and obligations entered in the land register
Tenancy agreements
Leasehold agreements
Development plans
Any exit clauses
If necessary, assignment of the rights of defects to the builder
Inventory: if residential property is handed over with inventory, you should record the relevant inventory in writing in the purchase agreement. This is particularly worthwhile for tax reasons: sellers can deduct the inventory from the sale price and therefore reduce any possible property gains tax.
Ensure fair payment conditions
Ensure a fair payment plan. For new builds, the following usually applies: as a buyer, you usually pay only a moderate down payment, if you pay one at all.
On the other hand, if the down payment is 30% or more, the buyer is, to a certain extent, the lender for the construction project. It’s usually better to operate on a step-by-step basis: the company in question only receives money after they have provided their service.
6. Do I have to have the purchase agreement publicly notarized?
A public notarization of the purchase agreement is required in order for a house purchase or sale to be valid. Only notarization by an authorized notary office obliges the buyer to pay the purchase price and the seller to transfer ownership to the buyer.
How the notarization process works
The buyer, seller and notary attend a meeting.
The buyer, seller and object of sale (property) must be publicly notarized.
The notary reads the purchase agreement aloud. Interruptions are permitted.
After all questions have been clarified, the notary and the parties sign the contract. The purchase is now locked and legally valid.
7. When will the purchase price be paid?
In general, the contracting parties can agree on the terms of payment individually and record them in the purchase agreement. The buyer must present a non-revocable promise to pay from a bank to the notary no later than when the purchase agreement is signed. This confirms that according to the agreed conditions, payment of the agreed purchase price will occur
The transfer of the agreed purchase price usually takes place only after the public notarization and after the entry in the land register. Depending on the payment agreement, the payment is only made in the course of the house handover.
Please note: if any conditions of a payment promise are not fulfilled, the notary cannot register the transaction with the Land Registry Office. Both parties usually agree on a date by which any exclusions must be resolved in the presence of a notary. If these aren’t resolved, the purchase agreement will no longer be valid.
Down payment to an earmarked account
Sellers often require a reservation agreement. Is this something you’d be happy with as a buyer? Then you can pay the amount into a down payment when entering into a dedicated blocked account. If the property purchase doesn’t go ahead, you as the buyer can easily access the money you paid.
8. Is it possible to withdraw from the purchase agreement?
As long as the purchase agreement has not yet been publicly notarized, you can generally withdraw from the purchase or sale. However, if you have provably agreed to the purchase or sale and you delay the transaction for an unnecessarily long time, the other contracting party can claim any expenses.
If the contract contains many flaws or faults, you can usually refuse to sign without any additional costs. This applies, for example, if important documents are missing or there is suspected fraud. If the purchase agreement is signed by both parties and publicly notarized, only the exit clauses contained in the agreement apply.
9. Purchase agreement: who is responsible for any property defects?
The following usually applies for existing properties: the seller excludes liability for defects in the purchase agreement. The buyer acquires the property in the condition it was at the time of the inspection.
The seller is only liable if they fraudulently conceal a defect. However, this is difficult to prove. A thorough examination of the property before buying is therefore very important – if possible in the presence of a construction expert.
The Code of Obligations generally applies to new builds. Accordingly, builders who worked on a building are liable for defects for up to five years. If defects are intentionally concealed, this increases to 10 years.
For new builds, a purchase agreement according to SIA Standard 118 is worthwhile. This is a standard from the Swiss Association of Engineers and Architects (SIA). It ensures consistent contract terms as far as possible for construction projects whilst taking into account mutual interests.
10. Download sample purchase agreement
The notary office is responsible for creating the draft purchase agreement. However, it makes sense to define the most important contractual contents (contracting parties, purchase price, object of sale) in advance.
Some cantons offer a special form for this. In this form, the buyer and seller can already enter the most important contractual contents and begin creating a purchase agreement by submitting the form.
Purchase information form for the canton of Zurich
This article was first published on 21.08.2023
