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Making an Offer
After viewing many properties, you’ve finally found the perfect home! It’s time to make an offer. Is the home priced fairly? How much should the offer be? What conditions should you include?
We can help navigate you through the offer process. To what degree, though, depends on the Buyer Representation relationship you have chosen i.e. either Buyer-Client or Buyer-Customer. There are some clear advantages with the Buyer-Client relationship when it is time to present an offer.
If you chose to be a Buyer-Client, we can legally represent you in the purchase of a property. As a Client, you will be provided with price counselling based on comparable properties and professional insight. Remember, the asking price may have very little to do with the actual value of the home or the price you should offer. As a Client, you would also be given recommendations on any conditions to include to your advantage.
If you opted not to be a Client, we are legally obligated to represent the Seller in the transaction. With this in mind, the Seller’s interests will be held first and foremost throughout the offer process.
Conditions in the Agreement of Purchase and Sale
If you’re like most buyers, conditions may be included in an offer. Some may include:
Even if you have been pre-approved for a mortgage, the property must be appraised to show the lender that the price you are paying falls within accepted market value. Once your financing has been approved, you are required to provide written notice to the Seller in the form of a waiver or amendment before the expiry of the condition.
This condition provides an opportunity to have a qualified home inspector perform a comprehensive visual inspection to assess the condition of the house and all of its systems. When you receive the home inspection report we will discuss with you whether the condition of the home warrants withdrawing your offer to purchase or how the required repairs may affect the sale price that was agreed upon. Many purchasers choose to have a termite inspection done as well.
Condominium Status Certificate
This condition applies only to the purchase of a condominium. It allows your lawyer an opportunity to review important information including the condominium’s governing documents, financial statements and insurance coverage. You want to be assured that the corporation is financially sound and meets all the requirements of the Condominium Act. Under the new Condominium Act, the property management company has up to 10 days to prepare the Status Certificate and can charge a maximum of $100 for the service.
- end of conditions –
Keep in mind that if there are multiple offers on the home, an offer with several conditions will not likely come out the winning contender.
Once you have determined a price and any conditions, we will then present an offer to the Seller by preparing an Agreement of Purchase and Sale, including any custom clauses.
There are many elements to an offer. Let’s take a closer look at these.
Elements of the Offer
There are many elements to an Agreement of Purchase and Sale. It is a legal document and with this in mind, it should be completed with great attention and care.
For the offer to be valid, it must contain a number of specific dates and times. Your initial offer will be valid for a specific period of time, usually until midnight of the same day or the following day, after which the offer is deemed to be dead. This time frame is called the irrevocable period.
This is the date set for the transfer of ownership of the property negotiated between you and the Seller and can also be referred to as the closing date.
This is the period in which your lawyer must determine if there are any problems with the title of the property and is usually set 30 days prior to the completion date.
A deposit cheque (e.g. bank draft, money order or certified cheque) must accompany the offer to the Seller. The amount of the deposit will vary depending upon the value of the property but usually represents between 5% and 10% of the purchase price.
Fixtures are any items permanently attached to the property. For example, a bathtub, sink, or toilet permanently plumbed in would be a fixture. Technically, anything nailed to the building is a fixture. Whereas items screwed on, because screws can be removed, are considered chattels. This is often an area of contention when buying a resale home. So be aware of this distinction and, if in doubt, clarify it in the offer.
Chattels, unlike fixtures, are not deemed to be part of the property and must be specified in the offer if you want them included in the sale. The following are some items you may wish to include in the offer; area rugs, ceiling fans, chandeliers and other light fixtures, draperies, wood-burning stoves and accessories, microwave ovens, refrigerators, freezers, stoves, washers and dryers, central vacuums, window air conditioners, garage door openers, storage sheds, swing sets and other playground equipment, garden furniture, and barbecues.
Negotiating the Offer
We will register your signed offer with the listing brokerage. A date and time will be set for the listing Sales Representative and your Realtor to meet and present the offer to the Seller. There are a number of options available to the Seller. He/she can:
• Reject the offer
• Accept the offer exactly as presented
• Make a counter-offer with specific changes, such as price, closing or conditions
If the Seller decides to counter-offer, you then have the option to:
• Accept the Seller’s counter-offer
• Make your own changes and sign the newly amended offer back to the Seller
Having an experienced Realtor on your side at this point of the process is key. If you chose to be a Buyer-Client, we will negotiate the offer with your best interest in mind. If you opted for the Buyer-Customer relationship, then we must represent the Seller in the negotiations, ensuring all terms are to the Seller’s advantage.
The goal is to have a successful outcome – to have the Seller accept your offer on the property. It is always good to consider how your offer would be viewed if you were in the Seller’s shoes.
When the negotiations are finalized and all the terms are agreed upon, you will receive a copy of the final Agreement of Purchase and Sale. You and your real estate lawyer should review the offer to see that its terms are stated exactly as you wish before you sign the final agreement.
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
FINTRAC is Canada’s financial intelligence unit, established in 2000, which reports to the Minister of Finance. FINTRAC acts in the detection, prevention and deterrence of money laundering, terrorist activity financing, and other threats to the security of Canada.
As of June 23, 2008, FINTRAC has mandated that for every Purchase and Sale in real estate, the Brokerage must obtain an Individual Client Information Record. In compliance with this law, anyone buying or Selling real estate must complete a FINTRAC form, disclosing: their full name, address, the nature of their principal business/occupation, and their date of birth. A piece of identification must be produced to confirm your identity, such as a birth certificate, valid driver’s license, or valid passport.
For more information, visit www.fintrac.ca.