Understanding the offer
Prior to showing your home, and after a thorough evaluation with a Real Estate Professional,
you should have the following: a realistic idea of the price, how low
you will settle, what conditions you will accept; and what terms would
With this information, you are prepared. When an offer is presented,
you will be able to compare it to your initial guidelines. Your Real Estate Professional
will evaluate these offers and, hopefully, arrive at one that comes closest
to your objectives. At the same time, however, your Real Estate Professional will likely
exercise some leveraging power with any other negotiable items. A Real Estate Professional
works on your behalf, considering all the factors, you as a buyer, and
the seller, to work at an agreement that is satisfactory for both parties.
It comes down to persuasion and negotiation. Your Real Estate Professional
has specialized training in this important area.
Evaluating the offer
When you have found the home you want, you will need to make a formal
written offer. This is called an “offer to purchase.” This
is a legally binding document which should be completed with due care
and diligence. This document outlines what you, the buyer will give (a
combination of price and terms) to the seller in exchange for the home.
It is highly recommended that a lawyer or real estate agent prepare the
offer on your behalf. This will reduce any financial or time errors. Review
the document before signing. If there is anything you do not understand,
be sure to ask for clarification. Once signed, the document is binding
and you could face consequences upon default.
An interested buyer will present an offer to your Real Estate Professional through his
or her agent. Your agent will discuss the offer with you, ensuring you
understand all aspects. The offer should clearly outline all terms, conditions
and details of the sale including:
- Buyer information. Seller information. This includes items (for both
parties) such as name, legal and civic address of the property to be
- Inclusions in the purchase price (e.g. appliances, carpeting, fixtures,
etc.) related to the original listing. List any additions or exclusions.
Be sure there are no liens or payment dates due on these items
- Detailed financial information: deposit amount, refund of interest
on deposit, down payment and mortgage, etc.
- Closing date for the sale of the property
- If you are assuming the seller’s mortgage, complete details
of this obligation. If the mortgage is not being assumed, the owner
needs to provide supporting documents, to show clear title (free of
all encumbrances). Existing mortgages must be discharged with sale proceeds
- Any Conditions to sale, such as satisfactory home inspection, mortgage
approval; sale of an existing home, etc.)
- Any work/obligations to be completed by seller between the closing
date and the date of occupancy (e.g. repairs, painting, leaving the
- Offer time frame. This is the period for which the offer is valid.
The offer either expires or is up for re-negotiation on that date.
- A Real Property Report is mandatory by the financial institution
for mortgage approval and by the lawyer or notary for transfer of ownership.
This certificate indicates outdoor improvements, from the date of construction,
such as decks, patios or pools.
Keep in mind that the purchase price is not the final price you will
receive. That is because you will have additional fees to cover from
the sale of the home including:
- real estate agent
- bank (for the balance of your mortgage and for any prepayment or discharge
- taxes (if there are any outstanding)
You and your agent should thoroughly review every detail. If there is
anything you do not understand, ask!
Before you accept and sign the offer, it is a good idea to have your
lawyer review the offer. This way, you can be confident nothing has been
missed, everything is legally accurate, and your interests are protected.
You could handle the offer in several ways, according to your timing and
If you are not attached to the home you want to buy, you could try and
present a very low offer. This offer is considerably lower than the asking
price. However, a low offer may be successful if the seller is desperate
to sell. The seller could present a counter offer. Alternatively, the
seller might turn down your offer completely and refuse to sell the home
to you. Your Real Estate Professional can offer some professional guidance on presenting
a fair and reasonable offer.
When you have fallen in love with a home, and you really want the
home, you could present your best offer. This offer leaves no negotiating
room, but if the market is hot, it is an offer that will attract attention.
Your Real Estate Professional can advise you on the best way of making an offer that is
fair and reasonable, without indicating to the seller that you are desperate.
Why pay more than necessary.
In a seller’s market, perhaps you may want to pitch a price, along
with the multiple offers probably on the table. This often happens when
there is a bidding war for the property. You could up the offer, or walk
away from the home.
An offer can be conditional or firm
When your offer is firm, then you are telling the seller you are willing
to purchase the home without any conditions. Upon acceptance of the offer,
you have purchased the home. This is a legally binding agreement. Upon
default, if you are unable to close, you could lose your deposit and face
legal consequences. Be sure to confirm your financial matters prior to
signing any documents.
A conditional offer includes stipulations on the purchase. These could
revolve around a home inspection, financing, or sale of your existing
home. If any of these conditions are not met then the home is not sold.
A sum of money, usually no larger than 3-5% of the purchase price, shows
that you are serious about purchasing the home. This amount will be applied
against the purchase of the home when the sale closes.
From offer to acceptance
Upon reviewing your offer, the seller can accept it as is, reject it or return with a counter offer. A counter could be in regards to price,
conditions, closing date or other variables. The offers will continue
between the seller and the buyer, until both parties have come to some
agreement, or one party stops the negotiations.
Once the offer meets with your approval, you will want to secure
the transaction with a deposit. This indicates your intention to proceed
with the purchase. When you have accepted the offer, you will
proceed through the closing details until you move in. The next article
in this series explains the closing procedures.