When you’ve found a special house you want to call home, you’ll probably feel excited and a bit nervous.  Your Realtor® is ready to help you during this important time.  With your agent, you’ll draw up an Offer To Purchase Contract… A written document that declares how much you will pay for the home, provided that certain conditions are met.

This is a legally binding contract that you will sign and date.  Your offer may have a time limit for the seller to accept, reject, or make a counter offer.  If a counter offer is made, you have time to respond.  Often, offers go back and forth until accepted, or until one party decides to end negotiations.

Be prepared to encounter a phenomenon called “Buyer’s Remorse.”

This occurs after you make a large purchase of anything, let alone a house.  You will ask yourself, “Did I make the right decision?”  The answer is usually “YES”… consider this self-analysis to be entirely normal!

HOW DO I MAKE AN OFFER TO PURCHASE?

Once you have found your dream home a written offer to purchase your property will be prepared.  This offer is usually recorded on a standard form entitled either “The Residential Purchase Contract” or “Residential Resale Condominium Property Purchase Contract” depending on what you are purchasing.

Your Realtor® will explain to you the process of receiving and reviewing offers.  Do not be surprised if you are presented with counter-offers which differ dramatically from your initial offer.  The seller an their agent are working to get the highest possible price for the property, with the most reasonable conditions and terms for the seller.  It is a give and take process.

The seller’s agent is under an obligation to bring all written offers to the seller for consideration.  If several offers are brought at once, you might be in a multiple offer situation.  The Seller’s agent is NOT under obligation to disclose that more than one offer might be in play.  Your Realtor® will be able to help you understand this new procedure better.

WHAT SHOULD THE OFFER CONTAIN?

All offers to purchase a property will contain a number of important details which you must consider.  The offer should include:

• Date of the offer
• Full legal names and address of both the buyer and seller
• Full legal description of the property
• Amount of the deposit
• Sale price
• Amount of the cash down-payment and details as to how the remainder of the purchase price will be financed
• Date for completion of the sale
• Date of possession of the property
• A list of the conditions which must be fulfilled before the sale can take place (normally called subject clauses or conditions precedent)
• A list of items which are not attached to the building (normally called chattels) but which are to be included in the sale price; for example; drapes, appliances, building materials, etc.
• Date and time at which the offer expires
• The signature of all buyers for the purchase

HOW DO I DETERMINE THE AMOUNT OF MY INITIAL OFFER?

There is really no rule to use to calculate a realistic offer.  Naturally the seller wants the best price, but negotiations can be influenced by many factors.

After you’ve looked at the home’s features and asked questions, all your questions, your Realtor® will research comparable sales in the neighbourhood to give you a good idea of the home’s current market value.  Then you consider what you can afford and make a fair offer.

If you’re working with a Realtor® they have a few techniques up their sleeve to find out some answers from the listing agent!  Most buyers and sellers negotiate the price, with both sides “giving” a little until they agree.

When the price is agreed upon, the paperwork will be initialed by both parties.

After the offer is accepted, you typically begin the process of arranging for a home inspection and arranging to get a firm mortgage commitment.  (You should have a full pre-approval for a mortgage prior to signing an offer.)

SUBJECT CLAUSES

The purpose of a subject clause contained in an offer to purchase is to set out a specific condition that must be fulfilled before the sale can go through.  One common subject clause you might encounter is one in which the buyers make the sale condition upon their finding the exact amount and type of financing which will enable them to purchase the home.

Remember that, if you write an offer that contains a subject clause, the property is technically pending, but the seller still has the right to continue marketing the property in hopes for a back-up offer in the event that you cannot complete on the sale.  You of course have ‘First Rights To Purchase’ once you have a signed contract in place.

If a seller inserts a subject clause that they are unable to fulfill, they do have the right to cancel the contract, refund you your deposit, and not sell you the property.

If one of the conditions contained in a subject clause cannot be met after every reasonable effort has been make to do so, the contract ends and there is no legal obligation to complete the purchase, and your full initial deposit will be returned to the buyer.

A seller accepting an offer containing a subject clause for the buyer selling their own house may insert a time clause in the contract.  A time clause will permit them to require the buyer to remove all subject conditions within a short, specified time period or cancel their offer if the buyer cannot follow through with the purchase.

WHAT IS HAPPENING ON THE SELLER’S SIDE?

When you make an offer to purchase your home, the seller will give considerable time and attention to reviewing each offer carefully.  Their agent will assist them in understanding the terms and conditions contained in your offer, and will provide them with any advice they request, but ultimately the decision is the sellers.  The sellers Realtor® should prepare a revised estimate of the net cash proceeds they will receive on completion of the sale, based on the sale price and financing arrangements stated in the offer.

THE SELLER HAS THREE OPTIONS:

1.  Accept the offer exactly as it stands

If they decide they would like to accept an offer the seller signs the offer agreeing to its terms and conditions.  It becomes a legally binding contract.  Legally binding means both you and the seller will be bound by the terms of the contract and must perform your respective obligations as stated.  Your performance can be enforced in a court of law.

If you are uncertain about any of the clauses contained in the offer, you may wish to consult a lawyer before signing the contract; however, keep the expiry date of the offer in mind if you decide to postpone acceptance!

Be sure you know the precise meaning of each term in the offer to purchase.

2.  Make A Counter-Offer

If the seller changes anything at all in the original offer, they are considered to have rejected that offer, they are considered to have rejected that offer and to be making a new offer to you the buyer.  This new offer is usually referred to as a “counter-offer.”

The risk in making a counter-offer is that if you, the buyer has changed your mind and rejects the counter-offer, they do not have the option to return to the original offer and accept it.

But, you as the buyer may decide to make another counter-offer back to the seller and the process of counter-offer could continue until an agreement is reached.

If, after accepting an offer, the seller decides they don’t want to sell the property, it may be possible to revoke the deal.  Many legal problems can result from the revocation of an accepted offer, so legal advice should be obtained.

3.  Reject The Offer

The seller is under no obligation to accept any offer or to make a counter-offer.  If however, they reject an offer which exactly meets all the terms you agreed to in the Listing Contract which they signed with their listing agent, they could be/are legally obligated to pay the commission.

WHAT’S A “DEPOSIT” AND HOW MUCH DO I NEED?

When you sign an offer to purchase, you will require a “good faith” deposit… That is, money that shows you are serious about wanting to buy the home.

Usually, you will be asked to write a cheque or get a bank draft for a specified amount, typically $5 000 to $10 000 or more, depending upon the value of the property being purchased.  This cheque will be held by either the sellers Realtor® in their Brokerage’s trust account, or possibly in your Realtors® Brokerage trust account.  Depending on the written clause in your initial offer to the seller, you may be required to submit a cheque with your offer, or your Realtor® may insert a clause that you will give the seller a certified cheque or bank draft within a few banking days after you have an accepted contract in place.  Therefore, your deposit must be made readily available before you consider signing an offer.

Once the offer is accepted your deposit money will be held in a special trust account.  Once your offer becomes firm (removal of all conditions), your deposit will be included as part of your down payment.  If your offer is not accepted, you’ll get back all of your deposit without interest or any deductions.

Keep in mind, though, that f you back out of an offer once it’s accepted and all conditions have been removed, you forfeit the full amount of the deposit any may be liable for other costs incurred by the seller.