Agreement of Purchase and Sale

An Agreement of Purchase and Sale is the written contract that sets out the terms of a real estate transaction between a buyer and a seller. It identifies the property, states the purchase price and deposit, lists the fixtures and chattels included, sets the completion and possession dates, and records any conditions that must be satisfied before the deal is binding.

What the agreement typically includes

The purchase price, the deposit, and any balance due on closing.
Fixtures and chattels — what stays with the property and what the seller takes.
Completion date (when title transfers) and possession date (when the buyer may move in).
Conditions, such as financing approval, a satisfactory home inspection, a condominium status certificate, or the sale of the buyer's current home.
Adjustments, which split prepaid property tax, utilities, and similar items between the parties.

Why it matters to a mortgage borrower

Lenders generally will not advance funds without a signed and accepted agreement, because it establishes the purchase price and closing date the mortgage must match. The price, together with the down payment, determines the loan-to-value ratio and whether mortgage default insurance is required. The completion date must also align with the buyer's financing; if an existing home has not yet sold, bridge financing may be needed to cover the gap. Once the agreement is firm, the buyer is committed and must arrange a mortgage commitment in time to close.

Firm offers versus conditional offers

A conditional offer lets the buyer walk away, or renegotiate, if a stated condition is not met within the deadline. A firm offer carries no such protection, so a buyer who cannot secure financing may lose the deposit and face other consequences under the contract. Because deposits, deadlines, and remedies are governed by provincial law and by the wording of the document itself, buyers should read every clause carefully and obtain legal advice before signing.

How it connects to the rest of the purchase

The agreement feeds directly into the mortgage file: the price sets the loan-to-value ratio that lenders and insurers use, the closing date drives the appraisal and commitment timeline, and the completion and possession date determine when funds and keys change hands. Any unpaid balance on closing, plus land transfer tax and other closing costs, must be covered separately from the mortgage advance.

Frequently asked questions

Is an Agreement of Purchase and Sale legally binding?

Once both parties have signed and any stated conditions have been satisfied or waived, the agreement is a binding contract. Before that point, a conditional offer gives the buyer a defined window to complete financing, inspection, or other listed conditions. If a condition is not met and the deadline passes, the deal may fall through and the deposit is normally returned.

Can a buyer back out of an Agreement of Purchase and Sale?

Only in the ways the contract allows. With a conditional offer, a buyer can usually terminate if a stated condition is not satisfied by the deadline. With a firm offer, backing out typically means the seller may keep the deposit and may pursue other remedies. Provincial rules and the exact wording govern the outcome, so legal advice matters.

Does the agreement affect how much mortgage I can get?

Indirectly, yes. The purchase price and the buyer's down payment together determine the loan-to-value ratio, which affects whether default insurance is required and what a lender will consider. The closing date also drives the timing for a mortgage commitment, an appraisal, and any bridge financing. The contract itself does not set the mortgage amount.