Memorandum of Agreement or “deal sheet” in NYC Real Estate
Go Back To Previous PageIf you are looking into how a real estate transaction works, you’ve seen just how much paperwork it involves. It seems like there’s just document after document, and keeping track is hard. To help you out, we’ve come up with a complete review of one of those documents: a Memorandum of Agreement (MOA) template, memorandum of understanding (MOU), or deal sheet. This review will spell out everything you need to know about this real estate document and make it easy to understand.
What is a Memorandum of Agreement? Is it a legally binding document? What happens if you break the agreement? What can you expect to see in a Memorandum of Agreement sample?
A memorandum of agreement is a proposed transaction summary circulated to lawyers and brokers representing the buyer and the seller after an accepted offer.
So, if you have had those questions, read on. After reviewing this review, you’ll find everything you need about the Memorandum of Agreements.
What is a Memorandum of Agreement (MOA) in Real Estate?
A Memorandum of Agreement may sound complicated and full of legal jargon that might be hard to understand. Still, it’s a pretty easy
document to read and understand. You may not have heard the word memorandum before.
However, you’ve likely heard of a deal memo. If you did not know, the word memo is short for memorandum, so this document is just a memo.
The agreed-upon objective for both the buyer and the seller is to enter into a formal contract signed by both parties through cooperative work, common goals and objectives, and good faith.
The buyer and the seller have the same plan, and they agree to work on getting a deal done and commit to meeting an agreed deadline to sign the purchase contract.
But a memo detailing what?
Memos are typically short and sweet, and a simple Memorandum of Agreement is no different.
This document summarizes a proposed transaction that may or may not happen. We use this memo in real estate, and the form summarizes agreed-upon terms that both sides agreed to and would like to move forward with.
The document’s “deal sheet” point informs the lawyers on both sides of the sale what the real estate agents and their
respective buyers and sellers have agreed.
Is an “MOA” or “MOU” Legally Binding?
As you know, a Memorandum of Agreement sample is just a summary of the potential transaction that may or may not happen. So the short answer is no, this document is not legally binding, and that is, at least not on its own.
Once a purchase agreement is signed, the deal is binding. However, as you’ll learn, that has more to do with the purchase agreement than the memorandum.
Since they are not legally binding, it is common for either party to break a Memorandum of Agreement.
Maybe the seller gets cold feet about selling their house. Or perhaps they get a higher offer before both parties sign the purchase contract or agreement.
What Happens if You Break a Memorandum of Agreement?
So, if a Memorandum of Agreement is not legally binding, are there any repercussions for breaking it? Since they’re not legal documents, breaking a Memorandum of Agre
has no legal consequences.
However, there can be other consequences when a buyer or seller breaks them. The most common issue is that someone (typically the buyer) may cost some money.
Sometimes, buyers pay for their attorney to do a title search and look into the property. They might also pay for the home inspection out of their pocket. If either occurs, the buyer will likely be out of those costs if the seller decides to back out of the Memorandum of Agreement.
Secondly, breaking a Memorandum of Agreement can lead brokers and other people involved in the agreement to a bad taste in their mouths. As a buyer or seller, if you allow your real estate agent to negotiate a price and you’ve come up with a Memorandum of Agreement, your agent is likely expecting the deal to come to fruition shortly.
If you back out and break the Memorandum of Agreement, the counterparty and your agent will probably be upset with you. This could cause issues with the same agent.
What does a Memorandum of Agreement include?
As you’ve probably gathered by now, a Memorandum of Agreement template is pretty straightforward. It is no more than a summary of a proposed transaction that outlines the terms agreed upon up to this point.
The document does not include much data, making it easy for both sides to fill out and understand before the lawyer’s jargon gets too involved.
Look at some things you typically see within a Memorandum of Agreement template. This will include the following:
- Effective Date and MLS number
- Property address
- Sale price
- Any additional terms and contingencies
- Closing date
- Inclusions and exclusions explicitly described the scope of work, if any, renovation.
- Seller’s and buyer’s names and addresses
- Both side’s attorney’s names, firms, addresses, phone numbers, fax numbers, and email
- Both side’s broker’s names, addresses, agent names, phone numbers, email, agent license IDs, and brokerage license numbers
That may seem like a lot of information just by looking at the bulleted list, but in reality, it’s all basic stuff you can fill out in just minutes once the buyer and seller negotiate the terms of the deal. But remember that even though a Memorandum of Agreement sample will have the sale price, closing date, and information for everyone involved in the sale, it is not legally binding or legally enforceable.
Georges has been working in Wall Street for the last 16 years trading derivatives with hedge funds. He has been an active real estate investor for over a decade. Georges graduated from HEC Business School in Paris and holds a master in Finance from ESADE Barcelona.
