From viewing houses to signing the offer, your real estate sales professional is with you every step of the way. A large part of their role is explaining the various steps in involved in either buying or selling a house.
Grounding yourself in real estate know-how is always a good idea and not just for new buyers. Things change and if it’s been 25 years since you purchased your home, it might be wise for you to brush up on real estate terms and information.
What follows is very basic information on The Offer to Purchase. It may address some of your questions or introduce new ones that you should discuss with your real estate agent.
The Offer to Purchase is the first step in your real estate transaction. In broad legal terms, the offer is a promise to enact on something, in this case the purchase of a property. While there may be verbal communications about the offer, counter offers and possibly acceptances, it’s not until the offer is written and properly signed that it becomes a legal and binding real estate contract.
Major Types of Offers:
Firm Offer: As the name suggests, a firm offer has no conditions. It indicates that the buyer is certain and suggests they have done their due diligence on the sale. For the
seller, this is the ideal type of offer. Barring extenuating circumstances, without conditions of sale, the buyer is unable to back out of an accepted offer.
Conditional Offer: Probably the most common type of offer, the buyer agrees to purchase a home as long as a number of pre-set conditions are met.
Multiple Offers: Receiving more than a single offer is the ideal situation for the seller. It’s the responsibility of the real estate sales agent to wade through the pros and cons of each offer in search of the best one. While price plays an important role in accepting an offer, stipulated conditions can also be a factor.
Inside The Offer:
All real estate offers of purchase start with the basics including: the date, legal description of the property and the names and addresses of both the buyer and seller.
But it also includes:
The Price: This is the amount the buyer is willing to pay for the property. Sellers shouldn’t be surprised when the price is not the exact asking rice but higher or lower than the listing price.
Expiration Date: Nothing lasts forever and sometimes an expiration date will encourage a seller to move a little quicker.
The Deposit: Every offer includes the amount the buyer is willing to put down. It is then applied against the purchase price when the deal closes. Your real estate sales professional will recommend and help you decide on an appropriate deposit size.
Conditions: In most cases, the buyer will establish a set conditions that must be satisfied before the offer is considered legally binding. Although I’ve had my fair share of somewhat strange conditional requests there are some standard ones such as:
- subject to a satisfactory home inspection,
- buyer obtaining financing or insurance (home, title insurance)
- standards certificate for such items as a well or sceptic tanks
- receiving or having conducted a current survey
- finally some buyers may subject the offer on selling their own home first.
Inclusions and Exclusions: This is a list of items that can range from appliances to light fixtures to window coverings. If things aren’t included on the list, it’s incumbent on the buyer to remove everything before the closing date.
Closing Date: This is the day of possession, when the property is legally transferred from the seller to the buyer and funds are transferred.
Accepting The Offer:
There’s no rule that the first offer has to be accepted. And it’s quite normal to make counter offers if you aren’t happy with what’s been presented. This is where your real estate agent’s market knowledge and expertise really shines. A seller and buyer may go back and forth several times during the negotiation process before the final terms and conditions of the sale are set.
Once an offer is accepted, signed, and the conditions are met, the offer to purchase becomes a legally binding contract.
In Between The Offer & Possession:
At this stage the lawyers become involved. Beyond reading the actual contract lawyers for both sides are responsible for the transfer of the property from the seller to the buyer. Even the mortgage is transferred from the buyer’s lawyer through a trust account to the seller.
Your lawyer will also advise you about land transfer taxes and legal fees and if you are selling, they will ensure that you are properly compensated for any prepaid utility bills or expenses.
Beyond the purchase price there are some extra expenses. You don’t have to wait to consult your lawyer, an experienced real estate agent will be able to help estimate costs for the following:
- Fees for the lawyer/ real estate sales professional /mortgage broker if appropriate
- Appraisal Fees/Survey costs
- A high-ratio mortgage insurance premium
- An interest adjustment for the mortgage
- Reimbursement to seller for the unused portion of any prepaid property taxes or utility bills
- Land transfer tax
Your real estate sales professional is your advocate. They act on your behalf and in your best interests. So if you have questions, make sure that you ask them.
Our team of real estate sales professionals is committed to finding you, your dream home. Whether you’re looking to buy or sell, the Karen Paul team is here to help with any questions.