So, we’ve found you a property that you really, really like. Now what? I thought we would cover the process, and some brief strategy involved in the all important first buyer offer on a property. Here, in brief, are the practical steps involved in submitting an offer:
1. Find the right property. Done that? Great! No need to dwell here – on to Step 2!
2. Perform a market value assessment or opinion of value. This step involves your Realtor, hopefully me, looking up recently sold comparable properties in the area and forming an opinion of the value of the prospective property. With this information you can then start to gauge at what level you feel comfortable buying the property, and whether you are getting a ‘deal’ or not.
3. Analyze the market conditions for this property. One major factor here is DOM (Days on the Market). Even if our opinion of value
shows that the prospective property has been listed for sale at well over the realistic market price, remember: this is only our opinion of value. If the seller has only had the property listed for 3 days, you are not likely to convince them, however wrong they may be, to drastically reduce their price. To buy the property you may potentially have to come up to meet them, wait until they realize they’ve listed too high in order to offer, or otherwise keep looking.
4. Prepare the offer. Preparing an offer typically involves signing four pieces of documentation with your Realtor. The ‘Working With A Realtor’ disclosure and the ‘Buyer Representation Agreement’, both of which you may have already signed; as well as the ‘Confirmation of Co-operation and Representation’ and the ‘Agreement of Purchase and Sale’ (APS), which are specific to each property. Your Realtor will guide you through the clauses of these agreements and explain them to you. Pay special attention when forming an APS to the conditional clauses inserted into the Schedule A on your behalf by your Realtor. These are your specific protections moving forward after the terms are agreed to, and often include a grace period for confirming your financing with your lender, your lawyer’s review of the property’s Status Certificate (condominium only) or a provision for a home inspection. These will allow you to back out of an unsatisfactory deal, should there be some unforeseen surprise in one of these areas. Very important!
5. Submit the offer. An offer is simply an Agreement of Purchase and Sale with only half of the required signatures on it – the buyers’. It is a contract, signed by the buyer and handed over to the sellers’ representative with a time limit for their response. If the seller signs the offer without changing anything, and within the time limit allotted, then the offer has become a binding agreement. It may still be conditional, however, with a time period remaining to satisfy any concerns or outstanding question either party may have before proceeding. The binding agreement at this stage simply indicates that the parties have agreed to the terms of the contract.
Once the offer is submitted, you will wait for a response from the sellers, which may be an acceptance of your offer as it was written, a rejection of the offer entirely, or more commonly, a counter offer with some aspects of the original offer changed to more closely suit the sellers’ wants (most notably price). You are now into the negotiation phase of the offer process, which is complex and beyond the scope of this article, but which involves counter-offering until you reach an agreement to terms and the subsequent purchase (closing) of the property.
Questions? Or are you looking to buy or sell Toronto real estate this fall? Call my office today and we’ll get you started out the right way.
Until next time,
Shaun Nilsson
1-888-712-7888
