If you’ve found the house of your dreams, then you must do one more step before it’s actually yours. This is negotiating the purchase offer. A purchase offer is also called the purchase agreement, and it can be one of the most stressful steps in the buying process. You may think that it’ll be accepted, but it could also be rejected. There may even be conditions to the sale.
Ensure that you’re working with a fully licensed realtor who is assisting you in every step. The realtor will not only ensure that your offer conforms to provincial laws and is legal, but also that the house seller also complies with disclosure rules. A realtor can answer your questions during the selling process. Either the buying agent or a lawyer will draw up the purchase offer for you to review.
Here is how to negotiate the purchase offer in 3 easy steps.
1. The purchase offer is drawn up by your agent or an attorney.
If your purchase offer is accepted, it then becomes a landing sales contract, also known as a purchase agreement. There is certain information that it must contain in order for it to be legally binding.
• Property address.
• Legal city property description.
• The purchase price offered.
• Financing terms. These include whether it will be a cash purchase or whether there will be a mortgage and for how much.
• A promise from the seller to provide the ownership or title of a property.
• The actual sale date or the closing target date.
• How much the initial deposit will be and the method of payment. Details about how or when it will be returned to the buyer if the offer is rejected. This payment may also be kept for damages if you don’t fulfill your part of the deal and back out.
• How additional expenses, such as property taxes, water, gas, and utility bills, etc. will be adjusted and prorated between the buyer and seller.
• If a survey is required, who will pay for it? Who will pay for inspections?
• The type of land title deed that will be granted.
• Other provincial requirements needed, such as having the contract reviewed by an attorney, disclosures about the condition of the home, and other clauses.
• Adding a subject that the buyer can do a last minute walk-through of the home right before the closing date.
• Setting an expiration date for the offer.
• Any additional conditions to the purchase offer. Two of the most common are those subject to financing acceptance from a lending institution. If financing isn’t obtainable, then the contract won’t be binding. A successful home inspection is another subject. If the report doesn’t satisfy the buyer, the purchase offer becomes void. There may also be other specific inspection conditions in the contract too.
2. The purchase offer is presented to the sellers of the house.
Usually, your agent will present the offer to the seller’s agent. If the offer is less than the selling price asked, the buyer may question the price of the home. A market evaluation can also be done to set everyone’s minds at ease. The results from the home inspection can also provide a bargaining advantage, particularly if there are many repairs required.
There are just some of the bargaining chips you can make in your purchase offer:
• You are paying the full amount in cash.
• You have already been pre-approved for a mortgage.
• You don’t already own a home that you need to sell in order to provide the purchase price.
• The home you wish to purchase is part of an estate sale.
• The couple who is selling the house is divorcing.
• It’s a buyer’s rather than a seller’s market.
During the time of purchase offer acceptance, the seller’s agent or an attorney will hold your deposit. If the offer is accepted, the deposit becomes a part of the down payment.
3. Counter-offers & the seller’s response to your offer
The best scenario is that the seller signs an unconditional acceptance of your purchase offer. This offer then becomes a binding contract as soon as you’ve been notified of the acceptance. The worst scenario is that your offer is rejected. It then becomes void and releases the buyer from the commitment.
If the seller is in agreement, but with exceptions, then you continue with negotiations. Some of the objections may be over your offered price being too low. They may disagree with your desired closing date. Perhaps they disagree with you wanting a piece of furniture or window coverings.
During this time, the seller may submit a written counteroffer. The ball is back in your court. You may read through the offer and accept it. You may also reject it. You can also re-submit another counteroffer. These offers can go back and forth until one party is ready to sign an unconditional acceptance.
Can you, as a buyer, withdraw your offer?
Yes, you can always withdraw your offer at any time. You have this option up until the seller accepts your offer. If you do choose to rescind your offer, you should first consult with your real estate agent and your lawyer. You should know that you’ll most likely lose your deposit. You can also be sued for losses that the seller may have accrued by depending on you for a commitment. For instance, you can be on the hook for a survey or an inspection fee.
Calculating benefits to the seller, including net proceeds.
Whether you’re the seller, or you’re selling a property before buying a new one, it can be of benefit to calculate your profits. This is cash you’ll be putting towards your new house. As a seller, if you’re analyzing the amount of cash that you’ll receive after a deal is done, you’ll need to subtract the following costs from the purchase price.
• Paying off amounts on the current mortgage.
• Paying off any liens on the house, including judgments or equity loans.
• Any agent’s commissions.
• Attorney and legal fees for closing.
• Land transfer title taxes and fees.
• Unpaid property taxes and utility bills.
• Survey and inspection costs and costs of repairs that you must cover.
Your Seller’s Counteroffer
Remember that unless a seller accepts your offer unconditionally, that they are free to walk away. The seller has the legal right to ask for a counteroffer, but it also can put them at risk of losing that chance to sell their house.
Sellers may feel that some costs shouldn’t be their responsibility. Many first time homebuyers may be short of cash or starting a family. Many home sellers choose one offer over another, as they wish to help out a buyer.
Whether you’re buying a home, or selling a home to buy a new one, be sure that you find a highly qualified real estate agent that can carefully evaluate all terms in purchase offers and counteroffers.
It’s a great feeling when your purchase offer has been accepted, as soon you’ll be in your brand new house or condo!