When buying or selling property, understanding the legal documents involved is very important. Two key documents in any real estate transaction are the Agreement for Sale and the Sale Deed. While both are essential, they serve different purposes. Knowing the difference between them helps buyers and sellers avoid confusion, stay legally protected, and complete the transaction smoothly.
In this blog, we explain the Agreement for Sale vs Sale Deed, highlighting their differences in simple, professional language to help you make informed decisions.
What Is an Agreement for Sale?
An Agreement for Sale is the first legal document in the process of transferring the ownership od a property. It is a legal document that is signed between the buyer and the seller of the asset where they both agree on the terms of the sale. This entails the sale price, the payment structure, the date of taking possession, and any other terms and contions.
However, this document does not convey the title. It only expresses the desire to sell and buy a property in the future. The physical transfer of the property takes place at a later date through a Sale Deed.
The Agreement for Sale is executed before the full payment is made or before the construction is done (in case of the property under construction). It is an assurance that the sale will take place under certain terms and conditions.
What Is a Sale Deed?
A Sale Deed is the last document that is signed to finalize the property sale agreement. It is signed after all the conditions of the Agreement for Sale have been met, for instance when the buyer has paid the agreed price and the seller has given possession.
After the Sale Deed has been executed and the same has been registered, the ownership of the property is transferred to the buyer. It is conclusive proof of ownership and is compulsory under the Indian Registration Act, 1908.
In other words, the Sale Deed acknowledges the actual sale and provides the buyer with legal title to the property.
Why Both Documents Are Important
The Agreement for Sale and the Sale Deed are two documents that are used in the process of transferring the ownership of a property. One cannot replace the other. The first document is the Agreement, the second one is the Sale Deed.
For instance, when a buyer buys a flat in a new project, the builder enters into an Agreement for Sale which states that the property will be sold to the buyer on certain terms and conditions. After the construction is done and the buyer pays the full amount, a Sale Deed is prepared to convey the property.
Failure to produce either of the documents may cause legal problems or confusion in the future. Hence, both need to be managed carefully.
Legal Value: Agreement vs Deed
The Agreement for Sale and Sale Deed are different in legal terms. The Agreement for Sale is a legal document that proves the intention of the buyer but does not grant him/her any ownership. This agreement alone cannot give the buyer the right of ownership.
On the other hand, a registered Sale Deed provides the buyer with full ownership rights over the property. It is also accepted by the financial institutions for such things as securing an asset or for selling the property in the future.
This is why legal advisors advise that the Sale Deed should be registered as soon as the terms of the Agreement for Sale are fulfilled.
Can a property be sold based on an agreement for sale?
Therefore, it is unlawful to sell a property based on an Agreement for Sale alone. The sale is not complete until a Sale Deed is signed and registered.
This is because even if the buyer has paid the agreed price and has occupied the property, the property is still the property of the seller until the Sale Deed is signed. This can lead to serious disputes later on.
Therefore, even if both parties have good intentions, it is always advisable to finalise the transaction with a registered Sale Deed to avoid legal issues.
Key Differences at a Glance
The following are the five major differences between the Agreement for Sale and Sale Deed:
- Intent: The Agreement reflects the intent to sell, while the Sale Deed completes and legally formalises the transaction.
- Timing: The contract is signed before the sale, while the Sale Deed is signed after the fulfilment of all the terms.
- Ownership: Agreement does not transfer ownership; Sale Deed does.
- Registration: It may be registered or unregistered; however, the sale deed must be registered.
- Legal Standing: Agreement has very little legal authority; the Sale Deed is complete legal evidence.
Risks of Not Executing a Sale Deed
Failure to sign a Sale Deed can lead to legal and financial problems for the buyer. The following are some of the things that the buyer cannot do without a Sale Deed:
- Stake a claim on the property
- Mortgage a property to get a home loan
- Sell or transfer the property
- Defend ownership in court.
Despite the fact that all the payments have been made, the transaction cannot be completed without the signing of the Sale Deed and its registration. It is the only legal document that can be used to prove that the property belongs to the buyer.
Importance for Homebuyers
To the ordinary homebuyer, especially the first-time buyer, there is a difference between the Agreement for Sale and the Sale Deed. Some buyers have the impression that the signing of the Agreement is the last stage. Indeed, it is only the start.
The Agreement for Sale should always be followed by a registered Sale Deed. The buyers should ensure that the builder or seller gives both documents and all the terms are met as per the Agreement before moving to the Sale Deed.
Legal opinions and legal checks should be sought at every step of the transaction.
Common Practice in Real Estate Projects
In most of the real estate projects, especially those which are regulated under RERA (Real Estate Regulatory Authority), the Agreement for Sale is entered into only after the project is approved and the first instalment is paid. This safeguards the interest of the buyer and makes the transaction clear.
The Sale Deed is then signed by the developer once the construction is done, and the full payment is made. This makes the buyer the legal owner of the property as a result of the sale.
The following are the steps that homebuyers should be aware of and they should also have a checklist to ensure that the Agreement and the Sale Deed are signed and registered correctly.
Final Thoughts
It is crucial to distinguish between an Agreement for Sale and a Sale Deed in any property transaction. While the Agreement outlines the conditions of the sale, the Sale Deed draws the curtain on the transaction. Both are important, but the Sale Deed is the only document that transfers the ownership of the property.
To avoid getting into trouble with the law and to be sure of your position in the real estate business, always ensure that you use a registered Sale Deed and seek advice from professionals before signing any document.
Conclusion
Whether you are a first-time home buyer or an investor in real estate, it is helpful to understand the legal process. At Naiknavare Developers, the company’s policy is to be as open and honest with the customers as possible. With the help of professionals and focusing on the quality of homes, you can be sure of every stage from the Agreement to the Sale Deed.