The 15 PSA Terms That Matter Most

A purchase and sale agreement (PSA) for commercial real estate runs 30-60 pages. Hundreds of clauses. Most are boilerplate. But fifteen specific terms account for 80% of the dollar value at stake. Get these right and you're protected. Get them wrong and you'll spend the next decade paying for it.

This lesson covers the 15 PSA terms that matter most, what to push for on each, and the common traps to avoid.

1. Purchase price

The headline number, but with subtleties:

What to negotiate:

• The number itself
• What it includes (real estate, FF&E, personal property, intangibles)
• What it excludes
• Allocations between asset classes (matters for depreciation and tax)

Trap to avoid: Loose price language that lets the seller exclude something at closing. Spell out what's in the price.

2. Earnest money deposit

What to negotiate:

• Amount (1-5% of price typically)
• Initial deposit at PSA execution
• Additional deposit at end of DD (if any)
• Where held (escrow with neutral title company, not seller's attorney)
• When it becomes non-refundable (usually end of DD)
• Conditions for refund

Trap to avoid: EM held by seller's attorney instead of independent title company. This creates leverage problems if the seller defaults.

3. Due diligence period

What to negotiate:

• Length (30-90 days typical)
• What can be done during DD (inspections, environmental, financial review, etc.)
• Whether it can be extended (and on what conditions)
• What happens if seller doesn't deliver requested information promptly

Strategic move: Negotiate "DD pause" language — if the seller doesn't deliver promised documents on time, the DD clock pauses until they do.

4. Closing date

What to negotiate:

• Date itself
• "Outside" date (latest possible closing)
• Extension rights (typically 30-day extension for cause, with notice)
• Closing location and method

Trap to avoid: Closing dates that don't account for lender timelines. If your lender needs 60 days, don't agree to a 45-day closing.

5. Financing contingency

What to negotiate:

• Whether there's a contingency at all
• What "financing on commercially reasonable terms" means
• Approval timeline (typically 30-45 days from PSA)
• Specific lender or general financing
• Refund of EM if financing falls through during contingency

Strategic move: Even if you're confident in financing, include a financing contingency. The cost is small (sellers may demand a small concession) and the protection is significant.

Trap to avoid: Vague language that doesn't actually protect you. "Subject to financing" without specifics is unenforceable.

6. Property condition

What to negotiate:

• "As-is" vs "as-is with reps and warranties"
• Continued operation through closing
• Any specific repairs the seller will complete before closing
• Treatment of damage between PSA and closing
• Right to a final walk-through

Standard move: "As-is" subject to seller's representations and warranties (separately negotiated in Section 5 of most PSAs). This gives you reps protection without forcing the seller to fix everything.

7. Representations and warranties

What to negotiate:

The seller represents that certain things are true. If they're not, you have a remedy. Standard reps include:

• Seller's authority and authorization to sell
• No undisclosed litigation
• No undisclosed environmental issues
• Compliance with laws and zoning
• Truth and accuracy of financial statements provided
• All leases and contracts disclosed
• No undisclosed easements or encumbrances
• Property delivered in compliance with PSA terms

Strategic move: Push for as many specific representations as possible. Each rep is a potential remedy if discovered to be false.

Survival period: How long the reps survive after closing. Standard is 6-12 months. Push for 12+ months.

Cap on damages: The maximum the seller pays for breaches. Standard is 1-5% of purchase price. Push for higher caps.

8. Indemnification

What to negotiate:

• Who indemnifies whom for what
• Threshold ("basket") below which no indemnification applies
• Cap on indemnification (similar to reps cap)
• Survival period

Trap to avoid: "Mutual indemnification" that lets the seller make you responsible for things that aren't your fault. Read carefully.

9. Default and remedies

What to negotiate:

What happens if either side defaults?

Buyer default (typical): Seller keeps EM as liquidated damages. This is standard and acceptable.

Seller default (negotiable): Buyer's remedies. Push for:

• Return of EM
• Reimbursement of buyer's DD costs
• Specific performance (right to force the seller to complete the sale)
• Damages

Strategic move: Specific performance is the most valuable buyer remedy. Without it, the seller can walk and you get only your EM back. With it, you can force the sale.

10. Closing costs and prorations

What to negotiate:

• Who pays for what at closing (transfer tax, title insurance, recording, attorney fees, broker)
• How taxes, rents, deposits, expenses are pro-rated
• Treatment of utility billings
• Treatment of CAM reconciliations (commercial)

Local norms vary. In Florida, typical:

• Buyer pays: title insurance, doc stamps on note, intangible tax, survey, lender fees
• Seller pays: deed doc stamps, broker commission, title clearance work
• 50/50: closing fee, escrow fees

Negotiating outside local norms is possible but unusual.

11. Brokers and commissions

What to negotiate:

• Acknowledgment of brokers involved
• Who pays each broker
• Indemnification for any undisclosed brokers (protects you from third parties claiming commission)

Trap to avoid: Vague broker language that exposes you to unknown commission claims later.

12. Title and survey objections

What to negotiate:

• How long buyer has to review title and raise objections (typically 15-30 days from delivery)
• Seller's obligation to cure objections (or right to refuse, with buyer's right to terminate)
• "Permitted exceptions" that buyer accepts at closing
• Treatment of new title exceptions discovered after the original commitment

Standard structure: Buyer reviews title, raises objections, seller chooses to cure or not, buyer chooses to accept or terminate.

13. Casualty and condemnation

What happens if the property is damaged (fire, storm) or partially condemned (eminent domain) between PSA and closing?

What to negotiate:

• Threshold of damage that triggers buyer's right to terminate (e.g., 5% of value)
• Treatment of insurance proceeds (assigned to buyer at closing)
• Treatment of condemnation awards (assigned to buyer at closing)
• Required restoration before closing

Critical for Florida deals: Hurricane season makes this clause important. Make sure it's specific.

14. Tenant estoppels and SNDAs

What to negotiate:

• Which tenants must provide estoppels (all tenants, major tenants, X% of GLA)
• Form of estoppel (your form vs. seller's form vs. tenant's form)
• Deadline for delivery
• What happens if estoppels can't be obtained
• SNDAs required for lender financing

Strategic move: Make the seller responsible for obtaining estoppels by a specific date. Without this, the seller has no incentive to push tenants and you can't close.

15. Closing mechanics

What to negotiate:

• Where closing occurs
• How documents are signed (in person, electronic, escrow)
• Who delivers what at closing
• Order of operations (lender funding, closing escrow, recording)
• Conditions precedent that must be satisfied before closing

Trap to avoid: Vague closing mechanics that let the seller delay or refuse to close. Specify deadlines and conditions clearly.

Beyond the top 15 — additional terms to watch

A few more terms that can matter materially in specific deals:

Tax matters

• Allocation of purchase price for tax purposes
• 1031 exchange cooperation language (if applicable)
• Treatment of pending tax appeals

Insurance

• Required insurance through closing
• Assignment of existing insurance claims

Service contracts

• Which contracts transfer to buyer
• Which terminate at closing
• Notice requirements

Tenant security deposits

• Transfer mechanism (cash, credit at closing)
• Documentation
• Buyer's assumption of obligation to return

Operating covenants

• Seller agrees not to enter new leases without buyer approval
• Seller agrees not to make material changes to property
• Seller agrees to operate in ordinary course

Confidentiality

• Mutual confidentiality of deal terms and DD findings
• Survival of confidentiality obligations after closing or termination

Notices

• Delivery method (email, mail, courier)
• Required addresses
• Effective date of notice

Negotiating the PSA — practical tips

Use a competent CRE attorney

Don't use a generalist. CRE PSAs have specialized provisions. Hire someone who closes commercial deals weekly.

Prioritize ruthlessly

Not every term is worth fighting for. Identify the 5-10 terms that matter most for THIS deal and focus there. Concede on smaller terms to win on bigger ones.

Make markup decisions in writing

When you mark up the seller's PSA, document why for each change. This forces clarity and helps your attorney negotiate effectively.

Track changes through versions

Use Word's track changes (or a redline tool) to show every modification. Both attorneys review and accept/reject.

Have a deal lead

One person on each side should be the "deal lead" who approves all final positions. Decisions by committee slow negotiations and create inconsistency.

Watch for last-minute additions

Sellers' attorneys sometimes try to slip in new language at the last minute. Re-read carefully before signing.

Don't sign until you understand

If your attorney doesn't explain a clause clearly, don't sign. Demand clarity. Your attorney works for you.

What to take away

• A PSA has 30-60 pages but 15 terms account for most of the value at stake
• Top terms: price, EM, DD period, closing date, financing contingency, property condition, reps and warranties, indemnification, default and remedies, closing costs, brokers, title, casualty, estoppels, closing mechanics
• For each term, know what's standard, what to push for, and the trap to avoid
• Always include specific performance as a buyer remedy if you can negotiate it
• Make the seller responsible for obtaining estoppels by deadline
• Use a CRE-specialized attorney, not a generalist
• Prioritize ruthlessly — concede on small terms to win on big ones
• Track every version with redlines
• Don't sign until you understand every material term

Next lesson: psychological tactics in negotiations — how anchoring, framing, silence, and emotional management actually win deals.