You have found your perfect Realtor, located your dream home, and are ready to put in an offer! How exciting and scary at the same time. So what is involved in the offer process? There are a lot of forms that you are going to sign and if this is your first time signing then your Realtor is obligated to go over each form and explain every section to you. Please don’t sign anything that you don’t understand! This explanation process can take up to an hour and half depending on your understanding and the amount of questions you may have so you need to make sure you are setting this time aside and don’t be afraid to ask those questions. This is the BIGGEST purchase of your life so know what you are getting into.
You have found your perfect Realtor, located your dream home, and are ready to put in an offer! How exciting and scary at the same time. So what is involved in the offer process? There are a lot of forms that you are going to sign and if this is your first time signing then your Realtor is obligated to go over each form and explain every section to you. Please don’t sign anything that you don’t understand! This explanation process can take up to an hour and half depending on your understanding and the amount of questions you may have so you need to make sure you are setting this time aside and don’t be afraid to ask those questions. This is the BIGGEST purchase of your life so know what you are getting into.
The first form is the OFFER, this is the Agreement of Purchase and Sale. This is where you offer the price you want to pay for your dream home (more or less). To be honest this is the start of your negotiations. The asking price is just that, ASKING. The seller can ask for a price for their home but that doesn’t mean that it will sell for this price. If it is a Buyer’s market, more houses for sale than buyers, then the buyer’s Realtor will negotiate for less than the asking price, unless there are multiple offers on the home. If this is a Seller’s market, more buyers than houses for sale, then your Realtor will more then likely be working with multiple competing offers on the house and you will be looking at negotiations above the asking price. This is where you need to trust your Realtor! Your Realtor will know the market and have a good idea of what the house will sell for based on the trends in the market and their experiences. If you listen to their advise you will be in a better position to win the “bidding war”. I will explain multiple offers in another blog as it needs addressing all on it’s own!
As you go through the Agreement of Purchase and Sale there is a lot of legalese. Your Realtor should be able to explain all the wording in this contract. There are some surprising items in the contract that a lot of buyers are not aware of. First did you know that when you put in the offer to purchase there is a time constraint? This is the irrevocability section. This means that you are putting in your offer until a specific time and if the seller doesn’t accept or counter your offer in that time then your offer is null and void.
Also, a lot of people confuse the deposit with the down payment. The deposit is the money you are offering to complete the “trade”. Legally when you are writing a trade agreement (because technically that is what this is) you are agreeing to purchase the home, but to secure deal you need to offer a nominal monetary trade so that the deal is completed. The down payment is the money you need to secure your mortgage. See the difference. One is to complete the trade and the other is to get the mortgage. Now let’s confuse this a little further, the deposit is applied to your down payment for your mortgage or the purchase price of the house if you are not needing a mortgage.
Also, a lot of people confuse the deposit with the down payment. The deposit is the money you are offering to complete the “trade”. Legally when you are writing a trade agreement (because technically that is what this is) you are agreeing to purchase the home, but to secure deal you need to offer a nominal monetary trade so that the deal is completed. The down payment is the money you need to secure your mortgage. See the difference. One is to complete the trade and the other is to get the mortgage. Now let’s confuse this a little further, the deposit is applied to your down payment for your mortgage or the purchase price of the house if you are not needing a mortgage.
Moving on, another fascinating point is that if you are purchasing a house from someone who is not a Canadian Resident (say they were a resident of the U.S or any other country, other than Canada) your lawyer would need to withhold a portion of the money given to complete the sale. This money that is being withheld is to pay off the income tax owed to the Canadian government for the sale of the property. When the seller pays their taxes then they receive the money that was withheld. If they don’t pay their taxes, the buyer of the property is responsible for paying their taxes! It doesn’t seem right but it is true. Now I am not a lawyer and I am sure this is more complicated than I have explained it but needless to say your lawyer is earning their pay with all they have to do!
Finally, another item that surprises clients is the fact that this is a legal contract that is signed under seal and this means that should you die (and i pray this doesn’t happen), your heirs or estate are legally obligated to continue with the purchase of the house. There is no getting out of this, someone in your family is getting this house. Just remember if necessary the home could be resold after the deal has closed.
That is just the first document that you need to sign…there are a few more and I will get to those documents in future blogs…stay tuned!!
