It’s an exciting time when you’re buying a property, filled with a decent number of challenges ahead. One life hurdle to overcome during this chapter of your life involves making an offer to purchase: a decisive moment that requires going in with a fair understanding of the steps to follow and what strategic approach you should take. Good news! Confia real estate agency will help you find the broker best suited to meet your needs. This person will accompany you until the moment you’re sitting there signing the deed of sale. You’ll be in a position to make informed choices throughout your real estate journey. Welcome to your crash course…
An offer to purchase (or promise to purchase) is a legal document that binds a potential buyer to the seller of a property.
Withdrawing an offer to purchase can happen in certain circumstances but isn’t recommended.
A real estate broker needs to fill out a mandatory form to record a promise to purchase.
What’s an offer to purchase?
An offer to purchase (also called a promise to purchase) is a preliminary contract binding a buyer to the seller of a property in a real estate transaction. Once signed, this offer is binding on both parties. It’s a commitment by the buyer to purchase the property and a parallel commitment by the seller to sell it, if applicable, subject to certain conditions being met. T. The last step in the transaction involves the final signing of the deed of sale before a notary.
For an agreement to remain valid, meeting the agreed-upon deadlines in an offer is important when gathering the necessary signatures during this period. An accepted offer to purchase establishes a legal commitment until the purchase of the property is finalized.
Backing out of an offer to purchase
Since an offer to purchase is a legal document, it needs to be carefully drafted and must contain some essential elements: information that identifies the parties involved in the transaction, proposed purchase price, address of the property, etc. So it’s recommended to call in the pros, such as a real estate broker.
The offer to purchase is formal and binding, serving to prevent any ambiguity and potential confusion between the parties involved. Terms and conditions of the sale can be referred to in order to resolve any disputes that may arise.
Pitfalls to avoid
A successful real estate transaction requires some groundwork. And then there’s some things you should never do, actions to be avoided at all costs.
Don’t propose an unrealistic price without taking into account all the closing costs associated with a sale (we’re talking notary fees, taxes, insurance, etc.)
Don’t disregard real estate market trends.
Don’t shrug off legal issues when writing an offer.
Don’t walk in without knowing how much mortgage financing you can get.
Don’t skip the pre-purchase inspection.
Consider using a broker recommended by Confia who can effectively handle your offer to purchase and advise you on the right items to include and not overlook.
How to make an offer to purchase with a broker?
Your journey to making an offer to purchase with the help of a real estate broker starts by finding a trusted professional and setting a realistic budget. Also consider getting a mortgage pre-approval to strengthen your hand
You should pinpoint your needs and visit some properties on the market in the company of a broker recommended by Confia. If you’re interested in something you view, the time has arrived to make an offer that includes a price, terms and conditions of the sale and the closing date of your choice.
The broker has to register the promise to purchase by way of a mandatory form available from the Organisme d'autoréglementation du courtage immobilier du Québec (OACIQ), then guide you throughout negotiations, a process that may involve counter-offers and several other appendices according to each situation.
Once the promise to purchase is accepted (it was a match made in heaven!), it’s now time to set the conditions. For example, if a home inspection is a condition of sale then this is when to get it done. The transaction will be complete after the final signing of the deed of sale before a notary. And then the moment you’ve been waiting for… the house is now yours!
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Main components of a real estate transaction
Making an offer to purchase involves preliminary steps and getting the various documents in order to to prepare for the signing of the promise to purchase and deed of sale.
Certificate of location
First off, the certificate of location must be obtained from the seller to avoid any nasty surprises or post-sale legal disputes. This document plays an integral role in verifying a building's compliance with current laws and regulations potential problems such as property boundaries, servitudes or encroachments.
Note that the certificate of location must have been issued less than 10 years ago and must represent the property’s current condition.
Seller’s declaration
Much more than just a simple administrative document, the seller’s declaration is a mandatory form that informs a potential buyer of the property’s current condition and history. This form can help one make an enlightened decision about buying a property. It’s an invaluable tool to help your broker meet their obligations and target the factors that may impact a transaction.
Offer to purchase: 5 conditions
The conditions to be met in an offer to purchase depend on each party’s situation and the type of property. There are a number of potential conditions, including:
1. Financing condition
The financing condition can be divided into two separate components. The first is the cash purchase when a buyer already has enough funds to cover the property’s sale price. No mortgage loan is required in cases like this. The buyer should demonstrate that funds will be available within the expected timeframe indicated in the promise to purchase.
Conversely, if the buyer doesn’t have the total amount in hand, they can choose to get a mortgage loan. That involves getting a loan from a financial institution to cover part or all of the purchase price. The buyer has to contact their financial institution to start an application to access the necessary funding. This is a key step to becoming a homeowner.
We want to make sure you know that a mortgage commitment is different from a mortgage pre-approval. A mortgage commitment is a written confirmation (a specific letter) indicating a mortgage loan has been granted to the buyer for the acquisition of a property and must also include the address of the property to be sold.
This document usually includes information such as amount of the loan, interest rate, term of the loan, period of validity of the offer and conditions to be met (valuation of the property, for example). Regarding the proof that a buyer must present to the selling party in order to fulfill any financing conditions, this is a final mortgage commitment without any conditions. This mortgage pre-approval must be delivered to the seller within the timeframe specified by the financing condition included in the offer to purchase.
N.B.: The financing clause in an offer to purchase serves to protect you in the event of a mortgage loan refusal. This is a must-have condition that may give you the right to cancel the transaction under certain conditions.
2. Inspection condition
This condition gives the buyer time to schedule a property inspection before signing on the dotted line. Your broker recommended by Confia is obligated to advise anybody wishing to buy a property to schedule a full inspection by a professional building inspector. This clause defines the duration of the inspection condition period, usually one week. An inspector will identify any potential problem(s) during the inspection.
Checking a property's condition and identifying problems that could affect its value, usefulness or safety is a step not to be overlooked. One advantage is that if a buyer expresses dissatisfaction with inspection results (based on objective criteria) or the seller refuses to fix a latent defect, the inspection provides an out to withdraw from the offer to purchase – if significant issues are raised in the inspector’s report.
If major defects not included in the seller’s declaration are uncovered, the buyer can decide to completely withdraw from the offer without financial penalty or then ask to negotiate further with the seller to get repairs done or lower the price. Specific terms can be included in this clause.
3. Verification of divided or undivided co-ownership documents
The declaration of divided co-ownership (for the sale of a property held in divided co-ownership) serves as a guide to how co-ownership should properly function.
It defines the rights and duties of co-owners, as well as the conditions of management of common and private areas. All those involved have to adhere to this essential reference and it must be considered in the offer to purchase a divided co-ownership. The co-ownership agreement must be consulted in the case of undivided co-ownership (i.e., the sale of a property owned by several people in undivided co-ownership).
Before committing to buy a property, it is also a good idea to pay particular attention to the study of co-ownership bylaws, which form part of the declaration of co-ownership and any bylaws subsequently adopted. You should consider including a conditional clause in your offer to purchase to allow enough time for a thorough analysis of the declaration of co-ownership and its bylaws, or of the undivided co-ownership agreement, if you intend to purchase a divided or undivided co-ownership.
By taking this approach, you protect yourself against any potential unpleasant surprises. You should also make sure that the home you're looking at meets your requirements, budget and lifestyle.
4. Sale of the buyer’s home
The condition of sale of the buyer's current home is attached to an offer to purchase when the person wishing to purchase a home has to sell their current property before finalizing the purchase of a new one. This condition provides flexibility so the buyer can avoid the financial burden of having two mortgages at the same time, as well as potentially escape any penalties associated with the early repayment of a current loan.
It’s worth noting that this condition may hinder the seller’s freedom to sell their property. The 72-hour clause is triggered if such a situation happens and the seller accepts a new offer to purchase with all conditions met. The initial buyer has this time to attempt to meet all the conditions in the offer to purchase. If the buyer fails to meet the deadline, the offer to purchase becomes null and void.
5. Verification of lease (rental contracts in effect)
Is the property for sale currently being rented? The buyer and seller must respect the terms of the existing lease.
Offer to purchase process: 5 steps
A potential buyer and the seller have to address several points in order to properly complete an offer to purchase. The process becomes a whole lot easier with the help of a broker recommended by Confia.
1. Price and conditions
The party interested in purchasing a property must specify the amount they’re offering, while outlining any financial conditions - the financing condition and down payment (if applicable).
2. Establishing prerequisites
Before making an offer to purchase, the parties involved may negotiate certain clauses, including inclusions and exclusions, the date of signing of the deed of sale and the date of occupancy by the buyer.
3. Sealing the deal
Once all sections have been completed by a broker and signed by a potential buyer(s), the document will be sent to the listing broker. The deadline for the seller to respond must also be specified.
4. Obligations of each party
Mutual guarantees clearly define the responsibilities of each party in the real estate transaction.
The buyer commits to assume certain costs and fees, such as those related to the deed of sale.
The seller commits to deliver the property in the same condition as it was during the future homeowners’ last visit, as well as provide a valid deed or title and certificate of location.
5. Prerequisites have been met
The countdown for meeting the conditions starts on the day following acceptance of the offer to purchase and the property is considered sold once all conditions have been met.
Legal implications of an offer to purchase
It’s not recommended to back out once an offer to purchase has been delivered to a real estate broker or to the person selling on their own. Withdrawal of an offer is generally only possible under certain conditions specified by law.
After receiving an offer, the seller has the right to accept it, refuse it or make a counter-offer within the accepted timeframe that is usually 24 to 72 hours. If the seller accepts, the offer becomes a contract. In the event of refusal or no reply, the offer becomes void, freeing the buyer to try their luck elsewhere.
Multiple offers: how to stand out from the crowd?
A seller may receive several offers to purchase their property – the infamous multiple offers. Negotiations and a bidding war then come into play. A potential buyer has to work to increase their chances of coming out on top because the seller makes the ultimate choice.
Improving your offer to purchase
It’s challenging to deliver an attractive offer while keeping financial limits in mind. This competitive process causes potential buyers to offer higher prices. That’s one way to go. However, several other factors can be considered. The closing date, conditions included in the offer to purchase and a cover letter can make all the difference in the selection process.
Let’s get personal
It’s recommended to attach a cover letter to an offer to purchase to explain why you love the property and have to have it. You can share a brief description of you (and your family) and your motivation to buy (location-location-location or defining features of the home) and outline your offer conditions (price, deadlines, inspections…).
Consider adding some personal details to show your reliability and goodwill. Wrap up the letter on a positive note and include your contact details.
Owner is not on the same page
It’s ultimately up to the seller to whom they sell their property. It often happens that an offer is made and then asked to be adjusted or is even refused outright.
Potential reasons to refuse an offer to purchase or let it lapse
Show me the money It’s a lowball offer. In this case, the seller can decide to make a counter-offer that includes a higher price and/or modified conditions.
Unacceptable terms The owner rejects a specific demand.
Competition The seller wants to go with another offer.
Concerns about creditworthiness The owner is unsure of the buyer’s ability to pay.
Property title issues Legal cloud hanging over the property.
Unacceptable timeframe Closing and/or occupancy dates don’t work for the owner.
Disagreement about inclusions and exclusions A difference of opinion about what’s in and out of a sale agreement can lead to a refusal.
Personal reasons Case-specific factors are influencing the decision – family concerns or emotional angle (like the seller’s priority, for example).
What to do if an offer to purchase is refused?
Understand why Ask your broker for an explanation so you can improve your offer.
Tweak your offer Be ready to respond with an adjusted price or conditions to make the offer more attractive.
FAQ
What’s the difference between an offer to purchase and a promise to purchase?
These terms are used interchangeably. The offer to purchase (or promise to purchase) should not be confused with the deed of sale that’s signed before a notary. This action results in the transfer of title, i.e., the transfer of ownership from the seller to the buyer, in return for the price paid by the buyer.
Where can I view a promise to purchase form?
Online, on the Organisme d'autoréglementation du courtage immobilier du Québec (OACIQ) website, which provides relevant resources and advice on how to write an offer to purchase. The forms can be consulted, but not printed and used. A broker will provide the documents to be used in a real estate transaction.
Does an owner have the right to reject an offer to purchase?
Yes. There are several reasons why an offer to purchase could be refused: proposed price, terms of the sale, buyer’s financial situation, etc.
What are the key steps to an offer to purchase?
Budget Set a price you’re prepared to offer that takes into account the value of the property and your financial situation.
Terms and conditions Define (along with your broker) the offer conditions, closing date and other important terms.
Conditions Specify any conditions, like a successful inspection or financing approval.
Deadlines Specify deadlines for responding to the offer to purchase, inspections, financing, etc.
Negotiations A broker who knows what you’re looking for can easily put their experience and know-how to good use to help you get a deal in your best interests.
Complete transaction Once terms are accepted, your broker will walk you through the steps to close the sale by including agreed-upon conditions within the deadlines provided… then it’s time to celebrate!
Work with a real estate broker to receive personalized support throughout each of the six steps of your project.
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