Agreements of Purchase and Sale are documents which should not be taken lightly. They give to home buyers and sellers legal rights and responsibilities. |
Learn about them, and see what you can do before you enter into your contract.
Offer to Purchase
If you want to buy a house you have to submit to the seller your written Offer to Purchase.
Your agent should discuss with you all details and prepare the offer in writing.
The seller may accept or reject your offer, or respond with own counter-offer.
You can also choose one of these options when your offer comes back to you changed by the seller. Changes can be made as long as both parties agree to them. Once your offer is accepted by the seller you will have to deposit $500 - $1000, held in your agent's brokerage trust account.
Conditional Offers -
A conditional offer depends on whether some conditions (also called subject clauses or condition precedents) will be met.
When any of your conditions is not satisfied you can back out of the agreement without consequences.
Conditions reduce your risk of making a bad purchase. On the other hand, unreasonable and excessive conditions may discourage the seller to accept your offer.
Firm Offers -
A firm offer means that the buyer is prepared to purchase the home without any conditions. Firm offers are preferred by sellers since they enable fast sales.
Agents usually use pre-defined agreement forms. When there isn't enough space to enter all conditions into the agreement schedules are applied (also known as addenda or appendices). They are extra pages added to the contract to let the buyer and the seller write as many conditions as necessary.
When specific condition has been fulfilled both sides will sign an amendment - a legal note added to the agreement to remove that condition.
Amendments can also be used to change transaction terms, which can be renegotiated at any time, provided the mutual agreement principle is followed.
Agreement of Purchase
Once you and your seller agree on all terms and conditions, and all the conditions are removed your offer becomes the legally binding Agreement of Purchase and Sale.
At this point you will have to increase your deposit to 5% of the purchase price.
The deposit will be later transferred to your lawyer's trust account for transaction closing as a part of your down payment. If you put more than 5% down you will have to pay the rest of your down payment to your lawyer not later than on the closing day.
Let your agent do the job of negotiations for you - it's one of the main reasons agents
are hired for.
Make sure your agent knows everything about your home buying needs,
so he or she she can be an efficient representative and advisor.
Have your mortgage pre-approved as soon as possible. Secured financing will send a
clear signal to the seller that you are able to pay, and can get you ahead of other
Make sure your offer is reasonable and in line with average price in the area. Be ready
to walk away if you can't negotiate anything within your limits.
Think about what is important to your seller. If you carefully evaluate circumstances
you might be able to negotiate a better deal.
Distinguish between your needs and desires. Your needs should be non-negotiable. Rate your desires in terms of importance - such a list will help you decide what you
can compromise on.
Refrain from negative comments when you see the house. You may hurt the seller's
feelings and jeopardize negotiations.
What if I breach my contract
Most likely you will lose the money you have deposited towards the purchase of the property.
In addition, if you refuse to complete this legally binding agreement the seller can sue for damages, i.e. losses suffered by one side when the other side fails to fulfill its contractual obligations.
Respectively, you can seek legal sanctions for your own losses as well if your seller walks out of a signed deal.
What conditions can I make
For instance, you can make your offer subject to :
When to remove conditions
Deadlines to remove subjects must be accepted by both sides.
The standard is 10 working days for typical conditions.
Sellers are reluctant to accept longer time limits because properties are taken off the market once a contract is signed.