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Real Estate Legal Terms
Offers
Price
Terms
Counter Offers
Chattels
Once you have identified a home that you
wish to purchase, the next step is to have your
agent or lawyer draft an offer to Purchase (an
"Offer") which sets out the price, terms and
conditions on which you are prepared to purchase
the home.
The Offer must be in writing, signed by you and
witnessed before it is submitted to the Vendor.
Once the Vendor accepts it by signing with a
witness who also signs, the Offer becomes an
Agreement of Purchase and Sale (an "Agreement").
The two most important things to know about
Offers and Agreements are:
- The general rule is that they must be in
writing, signed and witnessed to be
enforceable. This also applies to all
modifications and amendments. It is
important to remember to get things signed
and witnessed.
- The other general rule is that the Offer
or Agreement once signed by the Vendors and
the Purchasers, and witnessed becomes the
only agreement between the parties about the
home. Therefore it is important to ensure
that it contains clear language about
everything that is important to you. See
below for information on terms,
representations and conditions, closing date
and requisition date.
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It is important to carefully consider the
price that you are prepared to offer for your
new home. Your realtor will be able to advise
you about the prices that other similar homes
have sold for in the area that you are
interested in buying, and about the fairness of
your asking price.
Some factors to consider include: Vendor's
circumstances, length of time the property has
been on the market, the number of times the
asking price has been reduced (and the amounts),
competitions for the property, the season,
general market conditions, zoning, proposed use
of the property, etc.
As a general rule, you should consider only what
you are prepared to pay for a particular
property (and not what the Vendor wants) in
deciding the price to put in your offer.
As another general rule, it is advisable to
submit a price that is below the asking price in
the hopes of getting a
counter offer from the Vendor at a price
that is below the asking price.
Remember not to get too attached to any
particular house before you offer to purchase
it. There are plenty of available houses out
there, and if you do not get a particular one,
there may be a good reason for it that may not
be obvious to you at the time.
Deposit:
A deposit is money paid by the Purchaser to the
Vendor (or his realtor or lawyer) usually in
trust, as "good faith" money to show the
Purchaser's sincere intention to close the deal.
It will be lost if the deal fails to close due
to the default of the Purchaser.
All Offers and Agreements provide for the
payment of a deposit which can be large or
small. It is normally $500 or $1,000 although
circumstances may warrant smaller or larger
deposits.
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Terms:
All Offers and Agreements contain terms and
conditions. Ask your agent or lawyer to give you
a copy of a standard Offer or Agreement and read
it. Many of the paragraphs contain standard
terms which will become part of your deal once
your offer is accepted.
An example of a standard term is that time is of
the essence. This means that things that must be
done by a certain time must be done by that
time.
Representations:
A representation is a statement by a party about
something that is relevant to the deal. It is
recommended that your offer contain statements
by the Vendor's about things that are important
to you.
The general rule here is that if something is
important to you, make sure that it is in the
Offer or Agreement properly worded to protect
you and your interest. Be sure to ask your
realtor or lawyer to assist you.
An example of a representation that you may wish
to include in your Offer is: "The Vendor
represents that the heating and cooling systems
and all related equipment is in good working
order on the date hereof and will be in good
working order on the date of closing. This
representation shall survive closing".
Be sure to ask to see a copy of the Disclosure
statement that the Vendor's normally complete
and sign when they list a property for sale.
Seek your realtor or lawyer's advice about
incorporating the representations in the
Disclosure Statement into your Offer. It is
usually a good idea.
Your lawyer or realtor can draft representation
clauses to deal with anything that is important
to you.
Conditions:
A condition is a term of a contract or Offer
that must be satisfied, usually by a certain
date, failing which the contract will be at an
end. These are extremely important clauses and
it is essential that you review carefully with
your lawyer or realtor those conditions that you
need to protect you.
It is very common for Offers and Agreements to
contain conditions respecting financing, home
inspection, and in the case of condominiums,
review and approval of Status Certificates.
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Counter
Offers or Sign Backs |
A counter-offer or sign back occurs
when the Vendor accepts your Offer with changes
that the vendor initials and returns to you,
your lawyer or your realtor. This operates as a
rejection of your offer and becomes a new offer
by the Vendor to sell the home to you on the
revised terms. If you agree with the revised
terms, then you can accept them by initialing
the revisions and delivering a copy to the
Vendors, their lawyer or realtor before the
irrevocable date in the Offer.
It is much more likely that the Vendors will
sign back or counter your offer than it is that
they will accept your offer as originally
presented. It is wise to expect that there may
be several volleys of offers and counter offers
before an agreement is finalized. You may think
of it as a game of tennis with the ball (Offer)
being "volleyed" several times until the parties
come to an agreement on all of the terms.
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Chattels are things that are not attached to
or affixed to the Lands, and fixtures are
chattels that are affixed to the Lands. Dining
Room tables, and chairs and Snow Blowers are
examples of Chattels. Built in cabinets
and Air Conditioners are examples of fixtures.
There are often issues about whether or not a
thing is a fixture (in which case it is included
in the purchase price) or a chattel (in which
case it is not usually included in the purchase
price).
The best rule of thumb is: If you want to ensure
that any chattel or fixture is in the house when
you close, make sure that the written offer
specifically referenced it as a chattel or
fixture that is included in the purchase price.
This eliminates uncertainty/confusion on closing
and is well worth doing.
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