Understanding an Offer of Purchase in Residential Real Estate

What You Need to Know about Residential Purchase Offer

Anna Dunaeva DLegal Anna Dunaeva September 26, 2022
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Offer to Purchase a House or Condo

There is nothing more exciting than finding the perfect place to call home. However, if you are in the process of making that purchase a reality, you will have to submit an offer of purchase. This is the buyer’s offer. It is a contractual document that a seller can accept or reject. The agreement will lay out the terms on which a buyer is willing to purchase the house or property.

Since an offer to purchase is legally binding, it is essential to understand what you are sending. There can be profound implications if the agreement is not completed correctly.

Offer to Purchase

An offer to purchase is a sale agreement between a buyer and seller. Once the seller accepts and signs the offer, the deal becomes legally binding. It will lay out the purchase price and any conditions like the possession date or stipulations that could affect the sale of the property.

An offer to purchase is usually prepared by the buyer’s realtor. You are not required by law to enlist the help of your real estate lawyer with your offer to purchase before it is sent to the sellers. However, your lawyer will be able to guide you through the legal document and ensure you don’t encounter any issues or surprises later on.

What Is On an Offer to Purchase

Most realtors will have a standard document template prepared by the Alberta Real Estate Association (AREA) they use to complete your offer to purchase. This will be a Residential Real Estate Purchase Contact when you buy a house or a Residential Resale Condominium Property Purchase Contract when you buy a condo. These should include but are not limited to the following:

  1. Both Parties’ Details – ensure the details for both the buyers and sellers are correct.
  2. Property Description – the description must match the legal description on the title deed.
  3. Total purchase price – this is the price you have offered to purchase the property.
  4. Deposit amount – the amount of the good faith deposit should be included. This will be applied against the total amount of the house.
  5. Offer expiry date – your offer should include a time limit in which the seller can accept, reject or make a counteroffer
  6. Conditions of sale – these are a list of specific conditions which will govern the sale. They can include conditions related to home inspections, removal of furniture, sale of your old home, renovations or mortgage approval contingencies. A conditional offer to purchase is one that relies on these conditions.
  7. Occupancy date – this is the possession date on which you may move in.
  8. Occupational rent – only in some instances may this apply. If the buyer or seller moves in early or late, the other may be entitled to occupational rent
  9. Defects – all known defects should be listed in detail.
  10. Items to remain on the property – all unattached goods you would like included in the sale of the property should be listed here. Also, the buyer or the seller should detail all attached goods or fixtures they want to exclude. Often there can be confusion as to what is a fixture and what are unattached goods. So, it is best to specify attached and unattached goods on your offer to purchase. This can include anything from chandeliers to window coverings to alarm systems.

The seller must agree to hand over the property under the conditions laid out in the offer to purchase. Any failure to do so can result in the buyer withdrawing their offer.

When Could an Offer to Purchase Be Revoked or Voided?

Once the seller agrees to your firm offer and signs an acceptance, you are obligated to carry out the purchase. In most cases, you can not cancel an offer to purchase. It is irrevocable at this point, so as a buyer, you must be confident of what you are sending when you do.

Other scenarios where an offer to purchase might fall through include the following:

  1. If a seller rejects your offer or it expires, it will terminate.
  2. If a seller is not satisfied with the terms of the offer, they can come back to the buyer with a counteroffer. This could be a different asking price, occupation date, etc.
  3. After the purchase offer has been signed, a buyer can withdraw their offer if all the conditions or clauses have not been met. For example, if the buyer fails to get the expected financing.
  4. If a buyer purchases a home from a developer, they may have up to 10 days to withdraw their offer; however, there may be costs associated with this.

In most cases, the offer will be exchanged via the two parties’ real estate agents. The real estate agent for the buyer and seller will consult with their client on whether or not the offer is advisable.

Things to Do Before Signing an Offer to Purchase

Before signing an offer to purchase, it is in the buyer’s best interest to ensure that their financing details are in order. This will make the transaction as smooth as possible. Get pre-approval for a mortgage from your financial institution, have your deposit money available, and have ready coverage for any other associated fees.

Once you declare your interest to the seller’s real estate agent, documents for the offer to purchase will be prepared. Although realtors usually prepare the offer, it is a good idea to consult a competent real estate lawyer to ensure that the offer reflects your wishes.

Thoroughly review the offer to purchase before passing it along to the seller. This will give you greater peace of mind that you are getting the property you have in mind and that there will be no surprises in the future.

Seller’s Representations and Warranties

Request as much information about the property as possible before submitting an offer to purchase. This includes past history of the property (for example, if there are leases in effect, if it was ever involved in a grow operation, etc.) and any information that might devalue the property for a potential buyer.

A standard offer to purchase requires the seller to disclose all latent material defects of the property. By signing a standard offer to purchase document, the sellers confirm that they have disclosed all relevant information about a property.

Drafting Your Offer to Purchase in Calgary, Alberta

When you buy through a realtor, they usually assist you with your offer to purchase. Also, they may discuss potential pitfalls with a real estate lawyer. If you wish to review your purchase offer with a lawyer, contact us to get started. Whether this is your first home or next investment property, we are here to make the process seamless and painless, and answer all your real estate questions. Having a lawyer that represents you and has your best interest in mind is necessary for closing a real estate transaction.

Questions?

The DLegal team is here to support. We will do our best to assist or connect you with those who can help.

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