Purchase Price

The advertised, or “list price”, of a property is not always firm. Sellers understand that there will be some form of negotiation in an offer, so they tend to give themselves a little wiggle room in their list price. This all depends on the type of market we are in. We have recently shifted from a heavy seller's market into more of a balanced market. This means it is now easier for a buyer to put multiple conditions in their offer and do their due diligence before purchasing a property. It's also a more seamless transition from selling one home and buying another as there are few obstacles on either side. To ensure you don’t overpay for your home we will look at recently sold properties in the neighbourhood to decide if it is priced properly and then we will come up with a reasonable offer price.

Deposit

This is separate from your mortgage down payment. Usually an accepted offer accompanies a deposit into a trust account that is held in trust between the buyer and the seller. This is often the real estate brokerage’s trust account. The deposit acts as both a good faith token and ensures the seller that you have the money put aside for a down payment and you are serious about buying the home. On closing day this deposit will go towards the purchase price of your home. The deposit is a type of security for the seller as well. If a buyer decides to breach the contract and not follow through, against their legal obligations, then the seller may be entitled to keep the deposit. As the buyer, you have protection against this through your subjects/conditions, which we will explain next.

Conditions

There are many moving parts of the Contract of Purchase and Sale Agreement. These come in the form of conditions (sometimes called “subjects”). A condition is something in the offer that needs to happen in order for the purchase to finalize. If a condition is not met, the offer falls through (and usually you will get your deposit back unless you acted in bad faith or if the contract stated that the deposit was non-refundable). The two most common conditions are financing approval and satisfaction of home inspection results. Even with a pre-approval you will want a financing condition because the lender will need to approve the property being financed. With a home inspection condition, if the inspection report shows issues with the property that you were not aware of then you may have the option to either back out of the deal, ask for repairs, or renegotiate the purchase price. Since both parties need to agree to any changes of the contract, if the seller says no then the deal may fall apart. There may be a number of other conditions that you may want to put into the contract specific to your circumstances or the property (ex: building permits, subject to sale of your current property, notice to tenants to vacate, etc.)

Review Of Seller’s Disclosure and Title Search

Two honourable mentions for conditions you may want to include are subject to review of the seller’s disclosure statement and review of the property’s title search. Seller’s often fill out a Property Disclosure Statement that outlines everything they know about the property and has their signature. A disclosure may not always be available in cases where the seller did not live in the property (rental units) or when a home is being sold “as is''. A title search is a document that can be obtained from the Land Titles Office that lists all charges and claims to title such as any mortgages registered on title, easements, rights of way, etc.

What Is A Condition And What Is A Term?

In the Contract of Purchase and Sale there are two main types of clauses - A “condition” and a “term”. The main difference between the two is that a condition is something the buyer or seller needs to waive or fulfill in order for the deal to continue, while a term is something a buyer or seller is obligated to do. For example, with a financing condition the buyer would need to get financing approved by their lender. If financing is not approved then the deal collapses and there is no penalty to the buyer and the deposit is returned (unless the contract states that the deposit is non-refundable or possibly if the buyer was acting unfaithfully). If financing is approved then the deal goes ahead as planned. An example of a term is the purchase price or the items to be included in the sale.

Included Items

Anything that is not physically attached to the property that you want to convey must be explicitly stated in the contract. This includes items such as kitchen appliances (fridge, stove, dishwasher, etc), washer, dryer, window blinds, etc. Items like alarm systems and security doorbells should be addressed also (especially if there is a monthly fee).

Closing / Possession Date

This is the day your name is registered as the owner of the property and you get to move in! The closing date is when you are registered as the owner of the property at the Land Titles Office. Usually adjustments for property taxes and other prepaid expenses are made for this day. The possession date is when you actually get to move in. This is often the day after closing in case there is a delay in the closing process.

Offer Deadline

An offer cannot be open for acceptance indefinitely. What if the seller does not respond in a timely manner, or at all? You don’t want to be waiting forever for a response. For this reason we put a deadline on the offer. It also prevents the seller from “playing the field” and gives them a sense of urgency to either accept, counter, or reject the offer.

As we mentioned earlier, to make an offer we fill out the Contract of Purchase and Sale with our terms and conditions then send it over to the seller. Once the seller signs the contract it becomes a legally binding document that conveys the property from the seller to the buyer. But what if the seller doesn’t agree to all the terms and wants to make a few changes? Quite often the seller will want to bargain for a better price or maybe make changes to the closing dates that they prefer. Literally anything in the contract is negotiable at this point, even your conditions. To do this the seller will make a counter offer. They make the changes to the Contract of Purchase and Sale and send it back. If you agree, you simply write your initials next to these changes to show that you acknowledge and agree to it. We now have a deal!