An offer to purchase is a written contract setting out the terms under which the buyer agrees to buy the home. It includes the offered price, and the conditions of the purchase. If the offer to purchase is accepted by the seller, it forms a legally binding contract that binds both the buyer and seller to certain terms and conditions.
When making an offer to purchase, your file should include the following information and supporting documents:
- Your personal identification - Your legal name, the name of the vendor and the legal civic address of the property.
- Purchase price - The price you’re offering to pay.
- Inclusions - Any items in or around the home that you would want to have included in the sale should be specifically stated in your offer. Some examples might be appliances, furniture or garage spaces.
- Your down-payment amount - Downpayment amounts are usually 5%, 10%, 15% or 20%
- Your deposit amount - A deposit is not absolutely necessary but is often given as a sign of good faith, especially when there are multiple offers on a unit.
- The closing day - The closing day is the date you take possession of the home. Closing days are usually 30 – 60 days after the date of agreement. But, at times they can be 90 days, or even longer.
- Date the offer expires - If the vendor does not accept the offer by this date, it becomes null and void. The expiration date is usually 24 hours-36 hours after signing.
- Other conditions - Other conditions may include a satisfactory home inspection report, a property appraisal, and lender approval of mortgage financing. This means that the contract will become final only when the conditions are met.
What happens after you make an offer to purchase?
Once you’ve made an offer to purchase, there are two possible responses:
- The vendor accepts your offer and you move on to the next steps of the purchase process.
- The vendor counters your offer, asking for a higher price or different terms. In this case, you can negotiate and agree on terms that are mutually satisfactory, or you can reject the counter offer and break the deal. In this case, any deposit that has been paid is returned to you in full.
Here are some tips for making an offer to purchase:
- Base your approach on real numbers - Your first offer should always be based on, and justified by, a comparative market analysis (CMA). Begin by consulting with your real estate broker about similar homes and recent sales in the neighbourhood. Ideally, your CMA should be based on homes sold within the past 3 months, although you may need to go back a year in slow-paced residential districts.
- If you’re considering submitting a lowball offer, engage in a candid conversation with your real estate agent. Your agent will be able to consult with the listing broker in order to find out whether an offer significantly below asking price will initiate a negotiation, or whether it will be rejected. In hot markets, a lowball offer could derail your chances of landing your dream home.
- If you know the competition is tight, consider including a personal note for the seller. Aside from the required paperwork (including your mortgage pre-approval!), and your broker’s presentation justifying the offer value, a message about your motivations to buy could just strike a personal chord and win you the home.