Basically, the offer is a precisely worded document that sets out the terms and conditions between the buyer and the seller. Once the offer is made and accepted, and after any conditions/contingencies of the offer are met, the offer becomes a legally binding contract-meaning that the buyer and the seller are obligated under law to hold up their end of the agreement and complete the transaction. For that reason, you must be very sure you understand what’s in your offer before you sign it.
A properly drafted offer should leave no room for interpretation. It should contain everything that is important to you about the home and the transaction. For example, if the MLS listing states that the washer and dryer are included in the sale, put that fact into the offer. How about that satellite dish in the backyard? If you want to be sure it’s sold with the house, say so in your offer. Having a written agreement about these things now will avoid complications later.
Preparing the offer:
If this is the first time you’ve purchased a home, you probably have never seen an Offer to Purchase Form before, let alone a drafted one. Not to worry. The Real Estate Sales Representative is knowledgeable about this subject and will prepare your offer taking into account all the factors that are important to you. Fortunately, Real Estate Sales Representatives don’t have to reinvent the wheel every time there’s an offer to be drafted. Standard Offer to Purchase forms are used by almost ALL Real Estate Boards. The wording on these forms has been thoroughly reviewed and tested through the legal system, and is broadly accepted.
That doesn’t mean, however, that your specific offer cannot also include special conditions you want. Every sale/purchase is different, and your offer will contain the wording that suits your needs.
Let us look closer at some of the specific areas in the Offer the Purchase agreement that will be custom tailored to fit your specific needs.
Purchaser/Buyer: That’s you (unless you are selling the home). If you’re buying the property with a spouse or other partner, each of your names should be listed exactly as you will want them to appear on the ownership document (deed) when the property is yours.
Vendor/Seller: That’s the seller. If jointly owned, each seller’s name should be listed in full, exactly as shown on the existing ownership document.
Real Property: This is the exact legal description of the property you intend to purchase. It should include the postal address, lot and plan number, as well as frontage and depth dimensions. The Real Estate Sales Representative and lawyer/attorney (some areas it is the title office or escrow officer) will make sure the property description is specific and accurate. This is most important.
Purchase Price: The price you are offering for the property.
Deposit (Earnest Monies): When you submit an offer to purchase, normally you are requested to include a deposit to demonstrate a serious intent to buy the property. This deposit will usually be in the form of a cheque (check), payable to the listing broker, who will place it in a trust account until the sale is completed or terminated. Your deposit provides the seller with some assurances that you will go through with the sale when the day of completion arrives.
NOTE: the deposit is not the same thing as the down payment. However, when an agreement is reached and the transaction is completed, the deposit will be credited in full towards the purchase price. There is no standard amount for a deposit, but the size of your deposit says something about how serious you are about buying the home.
Clauses particular to the agreement: As we mentioned earlier, every transaction is unique, so space has been provided (sometimes on a separate document) for any provisions that apply specifically to your offer. Sometimes there are provisions stated in the form of “conditions/contingencies” to the agreement. Conditions/contingencies are generally inserted at your request and for your protection. If a condition is not satisfied within the time allowed, your offer is no longer valid.
Often times, for example, the buyer will want to insert a condition/contingency in the offer to purchase that is subject to the buyer arranging a specific amount of money required for financing. Conditions must always be satisfied by a specific date or within a certain time. An unconditional offer that is signed by the buyer and accepted by the seller becomes a contract binding on both parties. However, if the seller accepts an offer containing one or more conditions, the contract is subject to those conditions. When the conditions are satisfied or “waived” (relinquished), the transaction becomes firm.
Keep in mind that if the seller receives two offers at or near the same purchase price, and one contains conditions/contingencies which the other does NOT, the seller may well be inclined to accept the Unconditional offer. Your Real Estate Sales Representative or Lawyer/Attorney can counsel you on the use of the wording of conditional clauses.
Chattels included and Fixtures excluded: In order to attract buyers, it is common for sellers to include in the selling price some chattels that are not normally considered part of the dwelling itself. These are MOVABLE pieces of personal property. Some examples are fridges, stoves, washer, dryer, microwave ovens and these chattels are listed as items to be included with the sale.
Fixtures are permanent improvements to a property that normally stay with the property as part of the sale. However, it isn’t always clear what constitutes a fixture or whether it will stay. For example, the seller will naturally want to retain a dining-room chandelier that is a family heirloom. Since the chandelier could be defined as a fixture, it SHOULD be listed as an exception in the offer. From a legal standpoint, if it is a fixture and not mentioned in the agreement as an exclusion, it is then considered part of the purchase price.
If there is any doubt in your mind as to whether chattels are fixtures and part of the agreement, specifically list the items you are concerned about in writing in your offer. Where appropriate, give make and model numbers, or describe the items by colour and location. Leave nothing to chance. You will avoid surprises later, when you take possession of the home.
Irrevocability of the offer: This is the period during which you leave the offer open for consideration by the seller/buyer. If you are not notified before the precise time and date specified that your offer had been accepted, the offer becomes “null and void” (no longer valid). The Real Estate Sales Representative can assist you in determining how long you should let the seller think about your offer, but it is often a period of less than 48 hours.
Completion Date: This date, often referred to as the “closing date” is the glorious day when the parties expect to complete the transaction. All documentation is filed, all monies are paid out – and the property is yours. Closing dates are often scheduled for 30-60 days from the date of the agreement (and some as long as 90 days unless it is a new home and this date could be substantially longer), although this period will vary with circumstances. Your Real Estate Sales Representative can help to negotiate a mutually acceptable closing date.
Time to examine title: When buying a home, you are really paying for ownership rights that go along with it. The “title” is the legal evidence of ownership, and you want to be sure your lawyer/attorney/title/ or escrow officer has time to search the seller’s title to make sure it is free of restrictions. If the sellers don’t have title to clear ownership, there may be complications in transferring title to you on the closing date. Give your lawyer/attorney/title/ or escrow officer as much time as possible to search title prior to completing the transaction. Also speak to your Real Estate Sales Representative lawyer/attorney/title/ or escrow officer about Title Insurance.
Involve Your Lawyer/Attorney: You may want to have your lawyer review the offer before you sign and submit it to the seller. Why? Because when it’s all said and done, you and the seller are legally responsible for what the offer says.
If you believe you will miss an opportunity to buy a home because you have to wait for your lawyer to review the offer, there is a simple solution. Ask your Real Estate Sales Representative to insert a satisfactory review by lawyer, usually within a period of 24 hours is appropriate. Most lawyers are very responsive to your request and almost all use fax email communication, so they can look at the offer right away. Do NOT expect your lawyer to comment of the VALUE on the property. His/her job is to review the document and ensure your rights are protected.