Elements
of an Offer to Purchase
Putting
it in writing for the seller
After much deliberation, you have finally selected
the home of your dreams. What now? Do you knock
on the seller’s door with a sack full of
cash and demand the keys?
Not quite. Buying real estate isn’t like
buying a pack of gum down at the variety store.
There is a process to be followed, and the first
step is to make a purchase offer.
Your real estate agent, working in close consultation
with you, will prepare the Offer to Purchase.
The Offer to Purchase is an important legal document
that says you agree to buy the seller’s
house (often contingent on certain conditions).
This process is not as straightforward as it sounds.
You want the seller’s house, but to reach
that point, you must be mindful of the seller’s
reaction to any conditions you demand in the offer.
Types of home purchase
offers
Your offer can be firm (without conditions), or
conditional:
- Firm offer to purchase a home: This is usually
preferable to the seller, because it means that
you are prepared to purchase the home without
any conditions. If the offer is accepted, the
house is yours.
- Conditional offer to purchase a home: This
means that you have placed one or more conditions
on the purchase. Common conditions make the
completion of the sale subject to a clean home
inspection, subject to financing approval, or
subject to the sale of the buyer's existing
home. The house is not sold until all the conditions
have been met.
As this purchase may well constitute the biggest
outlay of dollars in your lifetime, you don’t
want reckless disregard for detail to turn a real
estate investment into a financial setback. Both
you and the seller will want to take every precaution,
stating any contingencies clearly, to avoid the
possibility of legal issues later on.
The factors included in
the offer
When you’re making an offer to buy a home,
there are six main elements to consider:
- Price
Deciding how much to offer is one of the most
difficult judgments to make. Offer too little
(or offer too late), and you stand the chance
of losing the house to another bidder (particularly
in a seller's market). On the other hand, nobody
wants to pay more for something than it's worth.
Your Royal LePage real estate agent can help you
understand the local housing market by showing
you what comparable homes are selling for, helping
you assess the condition of the house, and determining
the type of competition you may face from other
buyers.
- Deposit
The deposit shows your good faith and will be
applied against the purchase of the house when
the sale closes. Your Royal LePage real estate
agent can advise you on an appropriate amount
(typically 5%).
- Terms
Terms include the total price offered and the
financing details. You may arrange your own financing
or ask to assume the seller's mortgage, especially
if it has an attractive interest rate.
- Conditions
Conditions are items that must be completed or
fulfilled prior to the closing (such as a home
inspection, obtaining financing, or selling your
existing house). List anything you want the seller
to pay for – carpet cleaning, warranties
and any repairs or credits for damages, and so
on.
- Inclusions and exclusions
Your offer may be contingent on certain items
being either included or excluded in the sale.
These items can be anything from appliances to
decorative items, such as window coverings or
mirrors (these are called chattels in legalese).
- Closing day
In Canadian real estate transactions, the closing
day is generally the day the title of the property
is legally transferred and the transaction of
funds finalized, unless otherwise specified (except
in Manitoba and Quebec). In British Columbia,
the possession date is legally one to three days
after closing.
When the negotiations are complete and all the
terms are agreed upon, your real estate agent usually
prepares a copy of the agreement of purchase and
sale showing only the final terms. Once this process
is complete, you and your real estate lawyer (or
notary in Quebec) should review the offer to see
that its terms are stated exactly as you wish before
you sign it.
Careful attention to detail and consideration
of the seller’s point of view should result
in a happy outcome: your confident stride through
the front door of your new house.
Royal LePage sales representatives are your
residential real estate experts. For helpful advice
about buying a home in your area, contact
Korinne Peachey from your local Royal LePage
real estate office.
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