What is the Difference Between Agreement of Sale and Sale Deed

Buying a home involves going to lots of documentation. But, do you know the significance of each document, how they differ from each other and how these documents support in proving the ownership of the property? Today, we will decode two key documents for you (home-buyers), Agreement of Sale and Sale Deed. Though the name sounds similar, they are actually two different documents. Let’s understand what are Agreement of Sale and Sale Deed documents, and their significance in safeguarding  the transaction legally. 

Both play distinct roles in property transactions, and understanding the difference between them is key to protecting your investment. 

What is an Agreement of Sale?

The Agreement of Sale is a legal document that serves as a preliminary contract between the buyer and the seller of the property. It outlines the terms and conditions under which the property will be sold, but it does not transfer ownership immediately. It is often the first step in a property transaction and typically precedes the Sale Deed.

Key Features of an Agreement of Sale:

• Binding Contract: This agreement serves as a legally binding contract between the buyer and the seller. Both parties agree to the sale terms, including the price, payment schedule, and the timeline for completion of the transaction.
  
• Advance Payment: The buyer usually pays an advance amount as part of the Agreement of Sale. This sum signifies the buyer’s intent to purchase the property, and the seller agrees not to sell the property to anyone else during the agreed period.
  
• Timeline for Sale Completion: The Agreement of Sale specifies the date by which the transaction must be completed, including the signing of the Sale Deed.
  
• Conditions and Covenants: This document outlines specific conditions that must be met by both parties before the sale is completed. For example, the buyer may require the seller to clear certain legal or financial encumbrances before proceeding.
  
• Not a Transfer of Ownership: It’s crucial to note that the Agreement of Sale does not transfer ownership of the property to the buyer. It is only a promise to transfer ownership at a later date, once the Sale Deed is executed.

Why is the Agreement of Sale Important?

The Agreement of Sale is important for several reasons:

• It ensures that both parties are clear about their obligations and responsibilities.
  
• It serves as evidence of the buyer’s intent to purchase the property, making it a key document for legal proceedings should any disputes arise.
  
• It helps protect the buyer from unscrupulous sellers, who might otherwise change their mind about the sale.
  

While the Agreement of Sale is important for initiating the transaction, it does not give the buyer full legal rights over the property. These rights are only granted after the Sale Deed is executed and registered.

What is a Sale Deed?

The Sale Deed is the final and most important legal document in the process of property transfer. It officially and legally transfers the ownership of the property from the seller to the buyer. The Sale Deed is executed after the buyer has made full payment for the property, and all terms outlined in the Agreement of Sale have been satisfied.

Key Features of a Sale Deed:

• Transfer of Ownership: The Sale Deed is the document that formally transfers ownership of the property. Upon execution of the Sale Deed, the buyer becomes the legal owner of the property.
  
• Legal Proof of Ownership: Once the Sale Deed is registered, it serves as the official proof of ownership. The buyer’s name is recorded in government records, such as the land records, making it a permanent part of the legal framework.
  
• Registration: One of the most important steps in the execution of the Sale Deed is the registration. The Sale Deed must be registered with the local sub-registrar office, in accordance with the Indian Registration Act of 1908. Failure to register the document makes the transfer of ownership incomplete and legally ineffective.
  
• Stamp Duty: The Sale Deed must be executed on a stamp paper of the value prescribed by state laws. The stamp duty is a tax levied on the transaction and varies from state to state.
  
• Details Included in Sale Deed: The Sale Deed contains crucial details such as:
  – The full names and addresses of both the buyer and seller.
  – A detailed description of the property, including its location, boundaries, and unique   identification numbers like survey number and property registration number.
  – The sale price of the property and the amount paid by the buyer.
  –  Any conditions that need to be fulfilled (e.g., clearances of dues).

Why is the Sale Deed Important?

The Sale Deed is the ultimate document that proves legal ownership. Without it, the buyer cannot claim full rights over the property, which may result in future legal disputes. The Sale Deed is essential because:

• It officially completes the property transaction.
  
• It ensures that the buyer’s name is recorded in government land records, confirming legal ownership.
  
• It provides legal protection to both the buyer and seller, as it is registered and verified by government authorities.

4. What Happens if the Sale Deed is Not Registered?

It’s essential to register the Sale Deed to ensure the property transfer is legally valid. Without registration, the transaction remains incomplete, and the buyer does not have legal ownership of the property. This can lead to complications, such as:

• Difficulty in selling or mortgaging the property in the future.
  
• Risk of the seller selling the property to another buyer.
  
• Potential legal disputes if the property is encumbered or has other issues.

Therefore, registration of the Sale Deed is a mandatory step to ensure that the buyer’s ownership is legally recognized.

Why Do Both Documents Matter?

For homebuyers, understanding the differences between the Agreement of Sale and Sale Deed is critical. The Agreement of Sale serves as the first step, setting the stage for a legal transaction, but it does not transfer ownership. The Sale Deed is the document that legally completes the transfer of ownership. Always ensure that both documents are properly executed and registered to avoid legal complications.

To safeguard your interests, it’s advisable to consult a legal expert or property advisor firm like Inframantra, who can guide you through the process, review documents, and ensure that all formalities are correctly completed. With the right knowledge and precautions, buying a property can be a secure and fulfilling experience.

If you want to enjoy a seamless home-buying experience, then get in touch with an Inframantra property advisor. Inframantra is one of the best real estate companies in Gurgaon, Noida, Pune, Delhi, and Jaipur that offers end-to-end assistance, from detailed consultation to seamless transition into your new home. Inframantra team even assists you throughout the documentation process so that you can move into your new home stress-free. 

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