What is a PSA (purchase and sale agreement) in commercial real estate?
A PSA (purchase and sale agreement) is the binding contract in a commercial real estate deal. What it covers, PSA vs LOI, deposit mechanics, and every critical date.
A PSA, or purchase and sale agreement, is the binding contract between buyer and seller in a commercial real estate transaction. It converts the business terms sketched in a letter of intent into enforceable obligations, setting the purchase price and earnest money deposit, the due diligence period, representations and warranties, closing conditions, default remedies, and prorations. Its effective date starts the chain of critical dates, including due diligence expiration, any financing deadline, and closing, that governs the deal until it closes or dies.
Where the PSA sits in the deal
What does PSA stand for in real estate?
PSA stands for purchase and sale agreement. In commercial real estate it is the long-form binding contract that follows the letter of intent, converting the LOI's business terms into enforceable obligations that govern the deal through closing.
The PSA is the moment a commercial real estate deal stops being a conversation and becomes a contract. Everything before it, the offering memorandum, the underwriting, the letter of intent, is preparation. Everything after it runs on the PSA's clock.
The document is drafted by counsel, usually the seller's, after the LOI is signed, and negotiated over one to three weeks. Because the LOI already settled price, deposit, due diligence length, and closing timing, PSA negotiation concentrates on legal terms: representations and warranties, title procedure, remedies, and closing conditions. McLane Middleton identifies four threshold provisions every PSA needs before anything else: identification of the buyer and seller, description of the property, the purchase price, and the closing date.
The Adventures in CRE glossary's example deal shows the standard rhythm around execution: a $50,000 earnest money deposit, a 30-day due diligence period following PSA execution, and closing 15 days after that. Execution starts the clocks; the rest of the deal is performed against them.
The key sections of a commercial PSA
Commercial PSAs vary by form, state, and negotiating power, but the anatomy is consistent. Terms below describe common practice, and none of this is legal advice.
- Purchase price and deposit. The price, the earnest money deposit, the escrow holder, and the schedule on which the deposit becomes non-refundable. The deposit is the contract's enforcement mechanism, so its mechanics get negotiated as hard as the price.
- Due diligence period. The buyer's inspection window and termination right. Thomson Reuters describes it as the purchaser's right to investigate the property and the seller and to terminate the agreement and receive a refund of its deposit if it finds any matters unsatisfactory. The full mechanics are covered on the due diligence period page.
- Title and survey. The procedure for delivering a title commitment and survey, the buyer's deadline to object to exceptions, and the seller's obligation (or refusal) to cure.
- Representations and warranties. The seller's statements about the property: authority, leases, environmental matters, litigation, liens, contracts. This is one of the most heavily negotiated sections. As McLane Middleton puts it, buyers prefer thorough seller representations while sellers prefer buyers rely on their own due diligence, and many commercial properties sell expressly as is, where is, and with all faults. Survival periods and liability caps define what these promises are worth after closing.
- Contingencies. Defined conditions that let a party exit, most commonly financing. A failed contingency generally entitles the buyer to its deposit back.
- Closing conditions. Conditions precedent to each party's obligation to close. For the buyer, Thomson Reuters calls these the last chance to retain its deposit after the due diligence period expires: continued accuracy of the seller's representations, delivery of closing documents, and delivery of possession.
- Default and remedies. What each side gets if the other fails to perform. The common structure gives the seller the deposit as liquidated damages on buyer default, and gives the buyer a choice of deposit return or specific performance on seller default.
- Prorations and closing costs. How income and expenses split at closing, plus allocation of transfer taxes and fees. These are state-specific line items; New Hampshire, for example, assesses a real estate transfer tax of 1.5 percent of the purchase price, customarily split between the parties, per McLane Middleton.
PSA vs LOI in one comparison
The two documents are easy to conflate because they cover overlapping terms. The difference is what happens when someone walks away.
The LOI is one to three pages, mostly non-binding, negotiated in days, and exists to align the parties on business terms. The PSA is a long-form binding contract, negotiated by counsel over weeks, that adds the legal machinery: procedures, promises, conditions, and remedies. Before the PSA, a dead deal costs the buyer its pursuit spend and some goodwill. After the PSA, the exits are defined and priced, and past due diligence expiration the price is usually the deposit.
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The critical-date chain a PSA creates
An executed PSA is, operationally, a set of deadlines. Nearly all of them are drafted as day counts from the effective date, so one date drives the whole chain. Here is a representative chain for a deal with a 45-day due diligence period and a 75-day close, using common structures from the sources above:
| Milestone | Typical trigger | Worked example |
|---|---|---|
| Effective date | Full execution of the PSA | July 1 |
| Deposit into escrow | Within a few business days of the effective date | July 3 |
| Seller document delivery | 5 to 10 days after the effective date | July 10 |
| Title and survey objection deadline | Set days before DD expiration | August 1 |
| Due diligence expiration | 45 days after the effective date | August 15 |
| Deposit goes hard, any additional deposit due | At DD expiration | August 15 |
| Financing deadline (if the deal has one) | Between DD expiration and closing | August 29 |
| Closing date | 30 days after DD expiration | September 14 |
Two properties of this chain make it dangerous. First, it is coupled: a late seller document delivery compresses the review window in front of the objection deadline, which compresses everything behind it. Second, several dates are use-it-or-lose-it. A title objection deadline that passes silently waives the objections. A due diligence expiration that passes without a termination notice hardens the deposit, even if the team had privately decided to kill the deal.
Run the failure math once and the stakes are clear. On a $10 million acquisition with a 2 percent deposit, one missed termination notice is $200,000 handed to the seller. That is not a hypothetical drafting quirk; it is the liquidated damages structure working exactly as designed, against a team that lost track of a Friday.
Default, remedies, and what each side actually risks
The remedies section defines the downside case, and it is asymmetric by design. On buyer default, the seller typically keeps the deposit as liquidated damages and remarkets the property. Sellers accept this cap because it makes the deal financeable for buyers; buyers accept it because it fixes their worst case.
On seller default, the buyer commonly elects between terminating with a full deposit refund or suing for specific performance, since the property is unique and money damages undercompensate. McLane Middleton also notes indemnification provisions that let buyers pursue post-closing claims for breached representations, subject to negotiated survival periods and liability caps. Where those caps land depends on who holds the stronger negotiating position, and it varies deal to deal.
Managing PSA dates across a pipeline
One PSA is a calendar problem a decent attorney and a diligent analyst can hold. A pipeline with four deals under contract is sixteen or more live deadlines, in different day-count conventions, held across email threads, contract PDFs, and someone's memory of what counsel said. Teams rarely miss dates on the deal everyone is watching; they miss them on deal number four.
MotionCRE treats the date chain as a first-class object. Each deal's workspace has a key dates tab for PSA execution, due diligence expiration, financing deadline, and closing, each with status tracking, and the calendar view shows every deadline across the pipeline in one place. The Friday that hardens a deposit stops being a surprise, because it has been visible to the whole team for six weeks.
The full workflow, including notice-date buffers and who owns which deadline, is in how to manage PSA critical dates. If you run this in a spreadsheet today, start from the earnest money and critical dates tracker template. And for the window that dominates the chain, see the due diligence period definition.
Browse more playbooks, templates, and definitions in the MotionCRE resource library.
- 1.McLane Middleton, Key Considerations When Negotiating Commercial Real Estate Purchase and Sale Agreements (accessed 2026-07-01)
- 2.Thomson Reuters, Negotiating Commercial Real Estate Purchase and Sale Agreements (accessed 2026-07-01)
- 3.M. Scott Evans Law, Key Clauses in CRE Purchase Contracts (accessed 2026-07-01)
- 4.Adventures in CRE, Letter of Intent (Glossary) (accessed 2026-07-01)