Once you have seriously identified a prospect for a house, the next step is to put in an offer to purchase it. This involves signing a legally binding document and providing a deposit as a sign of good faith to the seller. You'll be one giant leap closer to owning your new home or investment property!
Once you have decided on the price you are prepared to offer, David will draft the legal document and communicate it to the seller's representative on your behalf. The offer will specify the terms and conditions of your offer to purchase the home.
Photo by Joe Shlabotnik
Apart from signatures and dates, the legal document contains some standard key elements that you should be aware of:
- Price: Depending on what price comparable homes for sale are going for, any competition from other buyers, and your own budget, the price you offer may be different from the original asking price.
- Deposit: The deposit shows your good faith and will be applied against the down payment when the sale closes. Usually, it is 5% of the purchase price. It is crucial to have this amount accessible within 24 hours of making your offer, so if your deposit monies aren't liquid, you may wish to look into a line of credit from which a bank draft can be issued.
- Financing: Breakdown of how you will pay for the property.
- Conditions: Qualifiers in your offer that must be satisfied before a deal is struck. These might include 'property inspection condition', 'sale of buyer's home condition' or 'financing condition', to name a few examples.
- Attached and Unattached Goods: What will be left behind at the house by the seller, and what won't be? Generally, fixtures such as major appliances are left behind, while chattels (personal possessions belonging to the seller, such as furniture) are not, unless otherwise stipulated.
- Closing (Completion Date): This is the day the title to the property is legally transferred to you.
Types of Offers
Offers can be either firm or conditional. A firm offer means there are no conditions and, once everything is signed by all parties, you've entered into a binding contract to buy the home. It's definitely best to be 100% sure before entering into a firm deal – no regrets.
A conditional deal on the other hand, means that you have placed one or more conditions on the purchase; though you are still submitting a deposit with your offer, if these conditions aren't met, your deposit can be returned to you. For instance, a sale might be conditional upon your obtaining a satisfactory home inspection report within five business days of the offer date. If the inspector comes back with an unsatisfactory report, you can still back out of the deal and get your deposit back.
The seller might have conditions too! In all cases, we will go over the offer very carefully with you to discuss whether it's best in your case to go in firm or conditional – with the ultimate goal being your comfort level with the purchase you are about to make.
Your offer will usually be presented during a formal meeting between the sellers, their Realtor®, and David - while you wait nearby. The seller has three options once they have reviewed your offer: they can accept the offer, reject it, or submit a counter-offer. Unless your offer is insultingly low or worlds away from what the seller wants – we'll talk about the pitfalls of low-balling it! The seller will usually counter-offer to keep the negotiations open. He or she might make changes to the price, the closing date, or anything else you've stated on the offer that they disagree with. Together, we will decide on an appropriate response based on your plans and goals. Sometimes it will be in your best interests to walk away; at other times, we can counter-offer in return, or concede to some or all of the seller's changes.
The offers will go back and forth until both parties have agreed, or until one party ends the negotiations.