In every transaction involving the sale and purchase of real estate there are usually two important stages: The preliminary and the closing one.

There are a number of reasons why a transaction is not and should not be closed immediately upon the vendor and vendee coming together. The weightiest of these reasons is, that the vendee knows nothing about the character of the title which he is to acquire. It is quite true that in most cases the land contract furnished the vendee contains the vendor's guarantee to furnish a good title, but misunderstandings as to what constitutes such a title are so common, and the value of the vendor's guarantee is so frequently unknown, that no one should attempt to purchase property on land contract relying solely upon the representations of the vendor that at the proper time he will show a marketable title.

Perhaps the controlling consideration in such a transaction, that upon which depend all future relations between the vendor, the vendee and the broker as well, is the preliminary agreement. Much care and attention should be devoted to the preparation of this instrument. For it is this which determines whether or not the contract between the parties will be disposed of under the harmonious conditions which ought to surround the closing of every transaction for the sale of real estate. An erroneous notion persists among many of those who prepare instruments involving the sale of land, that whatever matter is omitted or not made clear in the preliminary agreement can be remedied and clarified at the time of closing. The preliminary agreement fixes the status of all the final relations between the parties. Neither the vendor nor the vendee need accept a land contract which either enlarges or limits the rights or obligations of either party and is not in full compliance with the preliminary agreement. If, as frequently occurs, either of the parties is willing to have his obligations enlarged in the final agreement, difficulty can be and often is avoided; if not the entire purpose of the preliminary agreement is nullified. The parties find it impossible to agree on the omitted details and needless and expensive litigation is bound to be the result.

As already indicated, the entire function of the preliminary agreement is to show the basis upon which the vendor and vendee have come together; who they are; what particular property is being sold; the price and consideration therefor; the terms and time of payment.

When these essentials are provided for, other details remain to be dealt with in the preliminary agreement, such as adjustment of rentals, date of possession of the property to be given, payment of assessments and other taxes, fire insurance, and many other details certain to arise when the transaction shall be finally closed.

The whole reason for the necessity of providing for all those matters in the preliminary agreement apart from the legal requirement, is to create a situation that is thoroughly understood by all concerned. It is to make them give and take when they are both freshly interested in the transaction and neither bound. It is to make them yield on various points which require yielding by one side or the other, when refusal to do so might overthrow the deal. It is intended, in short, to preclude every possible cause for friction or misunderstanding at a later date.