The Purchase Agreement & Contingencies

The purchase and sale agreement (PSA) is the contract that controls how you buy the land. The most important parts for a developer are the contingencies — your escape hatches.

Key terms

• Price & deposit (earnest money) — what you pay and what you put at risk up front.
• Due diligence / feasibility period — a window (often 30–120 days) to investigate the property and walk away for any reason with your deposit back.
• Contingencies — conditions that must be met or you can cancel: financing, entitlements/rezoning, clean environmental, acceptable title and survey, soils.
• Closing date — when you actually take ownership.

Why contingencies matter

A developer rarely closes on land before knowing it can be built. Smart deals tie closing to getting your approvals first (an "entitlement contingency"): you control the land, do the rezoning, and only close once the project is approved.

Practical moves

• Negotiate the longest feasibility period you reasonably can.
• Ask for extensions (often for an added, sometimes non-refundable, deposit).
• Make sure deposits are refundable during due diligence.

Going Deeper (Intermediate)

The purchase and sale agreement (PSA) with contingencies is what protects a developer: feasibility/DD, financing, entitlement, and title contingencies let you walk and recover your deposit if the deal doesn't work out.

Advanced / Pro-Level

Structure the PSA around your real risks:

• A feasibility/inspection period to do DD with a refundable deposit.
• An entitlement contingency — close only after the rezoning/approvals are in hand (so you don't own un-entitled land you can't use).
• Financing and title contingencies, plus extension options.
• Balance against the seller's desire for certainty (hard/non-refundable money). Sophisticated deals use option or rolling-takedown structures to control land cheaply while de-risking. The art is enough time to remove risk before your money goes hard.

Practice Challenge

Why might a developer insist on an entitlement contingency (close only after rezoning) rather than buying first and rezoning after? (Answer: rezoning is discretionary and can be denied — buying first means you could own land you can't develop as planned; the contingency lets you control the land while pursuing approvals and walk if they fail, shifting that entitlement risk off your balance sheet.)

In Practice

A buyer closes on land with no entitlement contingency, then can't get it rezoned — stuck with unbuildable dirt. Tie closing to your approvals so you control the risk.

Common Mistakes to Avoid

• No feasibility or entitlement contingency
• Closing before approvals are secured
• Non-refundable deposits during diligence

Takeaway: Tie closing to your approvals — control the land, get it entitled, then buy.

Educational content — not legal, engineering, or financial advice. Requirements vary by jurisdiction; always confirm with the local authority and your professional team.