Understanding The Basics Of An Offer & Important Elements Of The
Agreement Of Purchase & Sale For Buying Toronto Homes & Condos
For contracts and agreements in the sale of real estate to be legal in Toronto they must be spelled out on paper, rather than verbal, and signed by both the Buyer and Seller. An Offer to Purchase becomes an Agreement of Purchase And Sale when both parties have signed in agreement to the terms of the Offer. Here are the basic ingredients of an offer:
The Deposit You will be required to include a deposit along with your offer in the amount of 5% to 10% of the purchase price. The deposit is a sign of good faith that demonstrates to the Seller that you are serious about proceeding with the sale. It is made out to the listing broker who will place the deposit in trust until the transaction is completed. When the sale is closed, your deposit will be credited toward the purchase price. If your offer is not accepted or if the conditions of your offer are not met, the full deposit will be returned to you without deduction.
The deposit must be in the form of a certified cheque, a bank draft or money order in Canadian funds from a Canadian bank. Arrangements should be made now to ensure that the funds for the deposit will be available when it comes time to putting in an offer.
Conditions Most agreements will be conditional upon some other occurrence. Probably the most common condition contained in an Agreement of Purchase and Sale is the condition that the Buyer be able to arrange mortgage financing that is satisfactory to him. It is extremely important that conditions such as this be properly drafted, as a Buyer may be obligated to buy the property even if the funds are not available.
Other important conditions to be considered when drafting the Offer to Purchase a house are a condition of doing a home inspection of the premises and a condition that an up-to-date survey of the premises is available to the Buyer.
If you are purchasing a condo, it will be conditional upon the Buyer’s lawyer obtaining and approving the condo documents of the condominium corporation known the Status Certificate.
Fixtures Included Or Excluded? Fixtures are items affixed or attached to the premises, become a part of the property and lose their characteristics as chattels. Still, the distinction between a fixture and a chattel is often a difficult one and it is therefore important that any fixtures or chattels that you, as a Buyer expected to be included in the purchase price, be specifically listed as inclusions in the Agreement of Purchase and Sale.
Closing Date Your offer must specify when you are prepared to close or take possession of the property. It may be anywhere from one to three months or longer from the date of your offer. You must allow your lawyer time to complete the searches and documentation required. As a general rule, your lawyer will want 30 days to put in place all the searches, documentation and registration that are required for closing. Also, the date upon which the buyer takes possession of the subject premises must be a business day as it is imperative that the Land Title/Registry Office be open for the purposes of registering documentation so that the transaction is properly completed.
As a buyer you do not need to physically present in Toronto on the date of closing but notify your lawyer as soon as possible so other arrangements can be made.
When signing an agreement, it is important to devote some time to determining a convenient date for taking possession. It is also extremely important to realize that, in most cases, you will not receive the keys to the premises from your lawyer until late in the afternoon of closing, and any arrangements for the installation of utilities, delivery of appliances or moving your furniture must take this fact into consideration.
Irrevocability Of The Offer An Offer To Purchase is not good forever but has a time limit date on it called an Irrevocable Date. Your offer is irrevocable up to a specified dated and time, such as 6:00 P.M., Wednesday, March 15, after which time the offer is null and void. The time you allow the Seller to consider your offer will depend on the circumstances. It may be as short as a few hours or as long as 48 hours. There is no standard time period. You want this time period to be as short as possible, so that other buyers do not have time to submit offers which may be more attractive than yours.
The New Home/Condo Agreement vs The Resale Agreement When purchasing a new home or condo, the Buyer is usually confronted with an Agreement of Purchase and Sale that differs substantially from the agreement that is utilized for the purchase of a resale home or condo. New condo/home agreements are often much more complicated than resale agreements as they necessarily deal with circumstances not contemplated when buying a resale home or condo. It is important that a Buyer have his lawyer review the agreement relating to the new home purchase as there are often hidden costs involved as well as technical complications created by Harmonized Sales Tax (HST) and the New Home Warranty Program (if applicable).