What Is a Purchase and Sale Agreement in Commercial Real Estate?
Jul 10, 2026
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A purchase and sale agreement (PSA) in commercial real estate is the binding contract that governs the sale of a property. It sets the buyer and seller, the purchase price, the earnest money deposit, the due diligence period, the closing date, the contingencies, and the conditions the seller must meet to close, including delivering tenant estoppels and a certified rent roll. Unlike a letter of intent, a PSA binds from signature, and its schedule of deadlines, not its price, is what most often decides whether a deal closes or a deposit is lost.
Last updated July 2026.
Once a buyer and seller agree on terms, usually in a letter of intent, the deal moves into a purchase and sale agreement. This is the document that runs the acquisition. It is a schedule of firm deadlines wrapped around a price, and for a buyer it is the first thing to abstract, because the due diligence period it sets is the window in which every lease has to be reviewed and the rent roll verified.
What is a purchase and sale agreement in commercial real estate?
A purchase and sale agreement is the definitive, binding contract for buying or selling commercial property. It names the buyer and seller entities, describes the property, and states the price and the earnest money deposit. It then lays out the mechanics: the due diligence or inspection period, the closing date and any extensions, the title and survey review process, the seller's representations and warranties, how rents and expenses are prorated at closing, and the conditions each side must satisfy. For an income property, it also sets the tenant estoppel and rent-roll delivery conditions that tie the sale directly to the leases.
What are the key dates in a purchase and sale agreement?
Three dates decide money, and a fourth set governs title. The table below is the schedule a buyer abstracts first.
| Date or period | What it controls | What happens if you miss it |
|---|---|---|
| Deposit hard date | The day the earnest money becomes non-refundable | A buyer that walks after this date forfeits the deposit |
| Due diligence expiration | Last day to terminate for any reason and recover the deposit | The buyer loses its free look and its exit |
| Title / survey objection deadline | Window to object to exceptions the seller must cure | Unraised exceptions become accepted and encumber the property |
| Closing date | When title transfers and funds change hands | Default, unless an extension right is exercised and paid for |
What is the due diligence period in a PSA?
The due diligence period, also called the inspection or feasibility period, is the window (commonly 30 to 60 days) during which the buyer can investigate the property and terminate for any reason with its deposit refunded. It is the buyer's free look, and it is the busiest stretch of the deal. Inside that window the buyer inspects the physical condition, reviews the title and survey, and, most important for an income property, abstracts every lease and verifies the rent roll against the actual documents. Any discrepancy that would reprice the deal, a rent that does not match the roll, an option nobody flagged, a co-tenancy trigger, has to surface before the period expires, because that is the buyer's leverage to renegotiate or walk.
Because so many leases have to be read inside a fixed window, acquisition teams pair the PSA abstract with fast lease abstraction. The rent-roll verification is on rent roll abstraction, and the full diligence workflow is on lease abstraction for acquisition due diligence.
Is a purchase and sale agreement binding?
Yes. Unlike a letter of intent, which is mostly a non-binding proposal, a PSA is a binding contract from the moment both sides sign, subject to its own contingencies. The buyer's main escape is the due diligence termination right during the inspection period. Once the deposit goes hard, the buyer is generally committed and forfeits the deposit if it fails to close without a valid contingency. That shift from refundable to non-refundable is the single most consequential date in the document, which is why an abstract flags it first. If you are unclear on how a PSA differs from the non-binding step before it, see what a letter of intent is in commercial real estate.
What is an estoppel certificate condition in a PSA?
Most commercial PSAs make delivery of tenant estoppel certificates a condition to closing. The PSA sets a threshold, often estoppels from all major or anchor tenants plus a percentage of the remaining tenants, and the buyer can walk if the threshold is not met or if a returned estoppel contradicts the lease it was given. This is where the leases and the contract meet: the buyer abstracts each lease, then checks the tenant's signed estoppel against the abstract for any conflict on rent, term, options, or outstanding landlord obligations. A mismatch is both a closing risk and a negotiating point. The estoppel review itself is on estoppel certificate abstraction.
What happens after a purchase and sale agreement is signed?
The clock starts. The buyer deposits the earnest money, opens title, and begins due diligence, ordering inspections and abstracting the leases and rent roll. The seller assembles the documents the PSA requires it to deliver, including the rent roll, the leases, service contracts, and the tenant estoppels. Toward the end of the diligence period the buyer either objects, renegotiates, terminates, or lets the deposit go hard and proceeds. In the run-up to closing the parties finalize prorations, arrange the transfer of tenant security deposits, and, on the closing date, exchange the deed for funds. The closing binder that results is often a stack of scanned PDFs a buyer can run through automated document data extraction to file the record cleanly.
Can a seller back out of a purchase and sale agreement?
Not easily. Because the PSA is binding, a seller that refuses to close without a contractual basis is in default, and the buyer's remedies typically include specific performance, forcing the sale, in addition to damages. The seller's legitimate exits are narrow: an unsatisfied condition that runs in its favor, a buyer default, or a termination right expressly written into the contract. This asymmetry, a buyer with a broad diligence out versus a seller largely locked in, is a defining feature of the PSA and one reason the buyer's diligence deadlines get the most attention.
Who prepares the purchase and sale agreement?
On most commercial deals the seller's attorney drafts the first PSA, and the buyer's attorney marks it up. On portfolio sales or auctions the seller may issue a form PSA it expects all bidders to accept with minimal changes. Either way, the negotiated result is a document dense with dates and conditions, and every amendment that moves a date or the price has to be read together with the original, which is why teams abstract the PSA and its amendments as one record rather than reading them page by page.
The bottom line
A purchase and sale agreement is the binding contract that runs a commercial acquisition: price, deposit, due diligence period, closing, and the estoppel and rent-roll conditions that connect the sale to the leases. The price gets the headlines, but the deadlines decide the outcome. Abstract the PSA first, build the diligence calendar from it, then move to the leases the due diligence period requires you to review. You can pull every date and condition into structured fields in minutes with purchase and sale agreement abstraction.