Purchase & Sale Agreements
Timing To Negotiate PSA?
A common process in a land transaction is for the seller and buyer to first agree on the essential terms and conditions, which is usually summarized in a 2 or 3-page letter of intent (LOI). This LOI is typically non-binding but describes all of the basic business terms that will be incorporated into the binding purchase and sale agreement (PSA). Now the attorneys enter the scene.
In somewhat more rare cases, the binding PSA might get completed and signed by both parties within a week. However, the process of drafting and negotiating the agreement can more often span 2 – 4 weeks and sometimes longer. It begins with either the buyer or seller producing the first PSA draft, which is usually an agreed upon item within the LOI. The attorney for that party may take anywhere from 1 – 5 days to prepare this first draft, which is usually based on a previous PSA and incorporates the LOI terms.
Once the first draft is delivered to the other party, it may take another 1 – 5 days to review and provide comments and proposed edits in the form of a redline draft. Then the original drafting party will review the redline, and the negotiations continue through more redline drafts. Three weeks might pass by quickly as both parties and their attorneys are reviewing, conferring, and providing redline comments back to the other party. And when there are impasses, meetings with the seller, buyer, and both attorneys are possible to resolve differences and issues.
Overall, I would say that two weeks to get the PSA signed would be a fairly quick process. Four weeks can be expected, but a lot has to do with the complexity of the transaction. And as it gets more complex, the PSA process might last 6 – 8 weeks or longer.
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