Knowing how to write a compelling offer is crucial whether you’re a first-time homebuyer or a seasoned real estate investor.
Making the perfect offer can mean the difference between securing your dream home or losing out to another buyer. In this blog post, we’ve gathered a collection of expert tips and strategies to help you navigate the process of writing offers on houses and provide you with the knowledge and insights needed to draft an offer that captures sellers’ attention and increases your chances of success.
In the context of buying property, how does a promise to purchase differ from an offer to purchase?
The terms “offer to purchase” and “promise to purchase” are often used interchangeably, but the appropriate term is “promise to purchase.” This legal document represents a formal proposal from the buyer to the seller, expressing their intent to purchase the property. It outlines essential details, such as the offered purchase price and specific terms and conditions required for the transaction. Once the seller accepts the proposal, they sign the document indicating their agreement to proceed with the sale.
Items Generally Seen in an “Offer to Purchase” Contract:
- Purchase Price: The amount you are willing to pay for the property.
- Deposit: The initial amount of money you will put down as a show of good faith. It is usually held in trust by the seller’s brokerage.
- Closing Date: The date on which you expect the sale to be completed and you take possession of the property.
- Inclusions and Exclusions: A list of items that are included or excluded from the sale. For example, appliances, fixtures, or furniture.
- Conditions: Conditions are specific requirements that must be met for the offer to be valid. Common conditions include a satisfactory home inspection, obtaining financing approval, and reviewing strata/condo documents (if applicable).
- Title Search and Clear Title: The offer may be contingent on a satisfactory title search to assure no liens or encumbrances on the property.
- Chattels and Fixtures: A clear distinction between what items are considered movable (chattels) and what permanent fixtures are typically included in the sale.
- Irrevocability Period: The timeframe within which the seller must respond to your offer before it expires.
- Counter-Offer: If the seller decides to negotiate different terms, they may provide a counter-offer, and you can resume negotiating until both parties reach an agreement.
- Method of Payment: Specify how you intend to pay for the property, such as the source of funds, down payment amount, and financing details, if applicable.
- Prorated costs: Clarify how certain expenses, such as property taxes and utilities, will be divided between you and the seller for the period of ownership transition.
NOTE: The specific elements of the offer may vary based on regional real estate practices and the complexity of the transaction. Working with a qualified mortgage professional or lawyer helps you draft a comprehensive and legally binding offer.
Are You Allowed to Back Out of an Offer You’ve Already Made?
Let’s begin with the basics. Imagine you are someone who wants to buy a house and become a homeowner. You are searching for the right deal. In the beginning, you can freely visit open houses or meet with real estate agents to look at different homes. You can visit the same house as many times as you like without any pressure to buy it. The salesperson may try to persuade you to make a purchase, but you are not obligated to do so. However, things change once you make an offer and sign a legally binding contract. In certain parts of Canada, like Ontario, there’s a “buyer’s remorse period” for some real estate deals. During this period, which usually lasts ten days, you have the option to change your mind about the purchase after making an offer. This applies mainly to newly built condominiums and may not work for every type of house. Once you make an offer on the house, sign a contract, and put down a deposit, you are legally required to follow through with the purchase. If you decide not to proceed, you may face penalties. However, it is still possible to back out of a real estate deal if you arrange for an attorney to break the contract. Breaking a legal contract might have consequences, especially if a large amount of money is involved.
What are the contingencies that an offer on a house can include?
A contingency in a purchase agreement outlines specific requirements or conditions that must be fulfilled for the contract to become legally binding. In a real estate deal, the buyer and seller might agree on common forms of conditions.
- Inspection Contingency: Permits the buyer to conduct a home inspection to assess the property’s condition. You can negotiate repairs or request to cancel the offer if they find substantial issues.
- Financing Contingency: Permits the buyer to back out if they cannot secure a mortgage or if the property does not appraise for the agreed-upon purchase price.
- Appraisal Contingency: Similar to the financing contingency, the buyer can walk away if the appraisal value is lower than the offered price.
- Title Contingency: Allows the buyer to cancel the offer if issues arise with the property’s title during the title search process.
If any of these contingencies are not met, the buyer typically has the right to terminate the offer and get their earnest money deposit back. Additionally, some regions or situations may have different rules or requirements, so it’s best to be informed about the laws and regulations in the area where the property is located.
The Bottom Line
Making an offer on a home is a significant step, demanding thorough consideration and comprehensive preparation. Collaborating with an experienced professional is vital to create a compelling offer that sets you apart from other buyers while safeguarding your interests. Approaching the home offer with excitement rather than stress is possible when you rely on your agent’s expertise. Seek their guidance, inquire extensively, and with some luck, your well-crafted offer will be accepted, bringing you closer to the joy of settling into your new home.