Great, you’ve found a home you like! Now it’s time to put in an offer- this will help explain to you what that entails.
1. Putting in an offer
When you find a home that you love, your agent will be able to provide you with comparable homes that have sold recently to help you decide what kind of offer to put forward on the house you’re interested in.
Once you have decided on the price, your agent will put together documents called the Agreement of Purchase of Sale. The Agreement of Purchase and Sale contains standard clauses from the Ontario Real Estate Association to protect both you and the seller, however there are added components that are negotiable and conditions that your agent may add to the Agreement of Purchase and Sale to ensure that you are protected. If a deal is conditional, that means that certain conditions must be met before a certain time period for the deal to be firm or complete. This conditional time is usually always for the benefit of the buyer. Some of these conditions and negotiable components are as follows:
i. The Deposit- The deposit is an amount of money that you will submit after the agreement is accepted to show the sellers that you are serious about following through with the agreement. The deposit is submitted and made out to the seller’s real estate brokerage within 24 hours AFTER the Agreement of Purchase and Sale has been signed and accepted by both parties. If there are conditions on the agreement and they are not waived or met by the buyer then the deal does not go through and the buyer gets their deposit back in full.
ii. Financing Condition- Most first time buyers will need a financing condition to ensure that they can get the financing they need to purchase the home and feel comfortable with the mortgage payments they will be assuming once their offer is accepted. This condition is worded to say that buyers have a certain number of days to secure financing in “their sole and absolute discretion” and that the buyers must waive this condition before the time period allotted or the deal becomes null and void (usually 3-5 days). This gives buyers an escape clause should they find that they are unsatisfied with the mortgage they’ve been quoted.
iii. Home Inspection Condition - Home inspections are one of the most important ways that buyers can protect themselves when purchasing a home. We always recommend that buyers do a home inspection once their offer has been accepted to ensure that they become aware of any defects with the home. If the buyer is unsatisfied with the home inspection report, they have the option of backing out of the deal or asking for a price reduction based on the issues in the inspection.
iv. Status Certificate Condition
This condition is used only when purchasing a condo-townhouse or a condominium. The status report is a document the details the current financial state of the condo corporation. It will show exactly where the maintenance fees go and what they pay for as well as the amount of money in the reserve fund for repairs that need to be done within the condo building or the complex. It will also detail any restrictions on the building such as pet restrictions.
This document must be ordered the seller and is usually paid for by the seller (it costs about $100 to order). The document is then looked over by your lawyer to ensure there are no red flags or concerns.
This condition usually takes the longest as it can take several days and sometimes weeks for the document to arrive and then your lawyer is usually given a certain amount of time to review the document (3-5 days).
v. Closing Date
The closing date is the date on which the buyers take possession of the home. This is a flexible date and sometimes the sellers have a specific date in mind based on another home they may have already purchased or they prefer a longer closing date as they may not have purchased a home yet. If buyers are flexible about their closing date it can be beneficial as it can make their offer more appealing to the seller. 60-90 days from the purchase date is quite common for a closing date.
2. After submitting the offer
a. Once you have submitted the offer, it does not mean you have actually purchased the home. The seller has several options: they can either accept the offer, reject the offer completely, or sign back the offer with a counter offer. If they sign back the offer, the buyers will have the opportunity to either accept their counter offer, reject the offer completely OR counter the counter offer with another offer. A good agent will help you negotiate this process and help you do what best suits your needs as well as doing their best to keep a good relationship with the selling agent.