Making an offer to purchase real estate
If you have found the property that you think is right for you then the next step is to make an "offer to purchase". This offer to purchase is a legal document that specifies the terms and conditions of your offer to purchase the property. It can be a "firm" or "conditional" offer.
If you are using a realtor they will help you to draft the offer and also at that time provide you with current market information which will possibly help you to formulate your offer.
If you decide to make a firm offer then it means that you are prepared to purchase the house without any conditions attached to ther purchase for the seller to meet. The transaction may be quite simple, because if the seller accepts your firm offer straight off then the property is yours.
If however you decide to make a conditional offer, for example "subject to home inspection" or "subject to repairing the leaky heating system", then the seller has to agree to meet these conditions. There is also a time period allowed for the conditions to be met. At the end of that time period if the conditions are met by the seller, and the buyer has agreed to lift them from the offer to purchase, then the house is sold.
In real life the offer to purchase usually goes back and forwards between the buyer and seller a number of times with offers, rejections and counter-offers being added to the offer to purchase, until both parties have agreed on everything and signed it off.
When agreement has been reached the offer to purchase document usually looks pretty messy because each offer, rejection and counter-offer has to be initialled by the buyer and seller, until finally everyone signs at the bottom showing agreement for the purchase/sale.
Elements of an offer to purchase:
- Price. It usually depends on whether it's a buyers, sellers or balanced market, but is often different from the asking price intially.
- Deposit. To show the buyer's good faith a small deposit is usually handed over then the offer to purchase is made. It isn't usually a large sum of money, $1000 is quite quite acceptable in many cases.
- Terms. Includes the total price the buyer is offering, the buyer may also ask to assume the seller's existing mortgage if the seller has an attractive rate, or will state the financing details, e.g. cash.
- Inclusions and exclusions. For example the buyer may want the seller to leave particular items such as window coverings or light fittings. Or they may want to make sure that the seller takes them.
- Possession date.
Once your offer is accepted and if there are conditions, that they are met, then the offer becomes binding on both sides and a larger deposit is required at that point. If the buyer now walks away from the deal they will usually lose their deposit, and may also be sued for damages. Therefore it is vital that the buyer understands and agrees with the terms of the offer before it gets to this point in the deal.
At this point the lawyers kick in with their part of the process to enable you to become the proud owner of a new piece of Canmore real estate.