Aug 24, 2023

Understanding Agreement to Sell: Meaning and Implications

by Godrej Properties Limited



"Sale" and "Agreement to Sell" are legal terms related to property transactions. "Sale" refers to the ownership transfer of the property from the seller to the buyer. "Agreement to Sell" is a contractual document where the seller has committed to sell the property to the buyer at a future date upon fulfilling specific conditions.

In the complexities of real estate transactions, an agreement to sell plays a pivotal role in the process. It sets the stage for future property dealings and outlines the intentions of both buyers and sellers. This article delves into the significance of a sale and agreement to sell, its legal aspects, and how it differs from a sale deed.

What is an Agreement to Sell?

A Sale agreement is a foundational document that precedes the sale deed in a property transaction. It holds legal validity and expresses the seller's commitment to sell the property and the buyer's intent to purchase it in the future. This transaction is basis pre-established terms and conditions agreed upon by both parties. 

Contents of an Agreement to Sell

Since a registered sale and agreement to sell holds legal sanctity, it contains specific clauses agreed upon by both parties. These clauses cover penalties for breach of agreement and the right to terminate the deal. The sale agreement also includes the names and contact details of the parties, property details (carpet area, super built-up area, etc.), and its address; the property type, whether freehold or leasehold, is also mentioned, along with relevant terms and conditions for mortgaged or leasehold properties.

The agreement to sell includes a clause ensuring that the property will be free from encumbrances upon transfer. Additionally, the contract states the amount of token money, typically 10-20 percent of the total deal value, paid when signing the agreement. Finally, an agreement to sell gets completed at the time period specified in the contract unless otherwise provided in the contract. Sale agreements do not cover sales that have already occurred. 

Agreement to Sell vs Sale Deed

An agreement to sell signifies the promise of a future transfer of property ownership, whereas a sale deed marks the actual transfer of property ownership to the buyer. While the former is a legally binding commitment, the latter completes the transaction, making the buyer the rightful owner of the property.

Conclusion: Safeguarding Future Transactions

Understanding the essence of an agreement to sell is crucial for buyers and sellers in real estate dealings. This legally binding commitment paves the way for a smooth property transfer process and outlines the responsibilities of each party. By adhering to the agreement's provisions and seeking legal counsel if needed, individuals can ensure a secure and successful property transaction journey.


Q. What is the difference between an agreement to sell and a sale deed?

A. An agreement to sell is a promise for a future property transfer, while a sale deed document captures the actual transfer of property ownership to the buyer.

Q. Is the agreement to sell legally binding?

A. Yes, an agreement to sell is legally binding. It outlines the commitments of both parties in the property transaction, making them legally obliged to fulfil their roles as agreed upon.

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