Some of you have not bought or sold a home for more than a decade and likely find the offer process confusing to recall what is involved. For those who have past experience with the home buying process, this may serve as a helpful reminder. If you are new to this, it will give you an introduction to what happens during and after the offer process.

Let's break the offer portion of the home buying process into 4 steps:

1) Offer Presentation

2) Offer Acceptance

3) Firm up the Offer, 

4) Closing

1)    OFFER PRESENTATION:

Price:

You as the buyer and myself as your realtor discuss the details of your offer to purchase. We will review and evaluate overall market conditions, I will provide a comparative pricing analysis of competing listings and recently sold activity in the neighbourhood, we review the home's condition and evaluate what upgrades or repairs might need to be considered, we talk about the possible motivation of the seller (are they motivated to sell because they have already purchased a new home, or is vacant, or an estate sale?), will there be competing offers, and I may ask "how disappointed will you be if you do not get acceptance of your offer"? After much discussion, an offer price is determined.

Conditions:

Another part of the offer process is to determine what conditions need to be in the offer. Conditions may include financing approval, home inspection, sale of your current property, seller providing documentation (ie site plan, survey), and may even include agreement on a vendor take-back mortgage. Conditions are varied and are typically used to protect the interests of the buyer.  Note, the more conditions you have in your offer can be viewed by the seller as negative as the offer firming up is in the buyer’s hands and may either be delayed or not even come together at all. If there are other offers on the table with fewer conditions, the seller is more likely to accept those offers provided closing date and price are acceptable. In our current competitive market I council my clients to try and satisfy many of the conditions before the offer stage or at least do some due diligence ahead of time so as to not hinder the negotiation process but at the same time protect you as the buyer.

Irrevocable Date:

All offers must have time constraints or time limits on the offer. In other words, You offer to purchase and give the seller until 'this time/date' to accept the offer. I work within both seller's and buyer's needs here. The irrevocable date may be specifically outlined in the MLS details but most offers will have an irrevocable time frame of 4 to 24 hours, shorter in competition situations. Or it could be 36 hours for a seller who lives out of town. An example is, if we submit an offer at 6pm Wednesday with a 24 hour irrevocable date we are giving the seller until 6pm Thursday to respond. If they do not respond before 6pm Thursday, the offer is null and void.  In contrast, if the seller signs it back with a change to any term in the offer, a new irrevocable date must be included.

Closing Date:

The offer must indicate a closing date which is the date, you the buyer, want to start owning the home.  Very often the choice of a closing date is an important component to the seller’s willingness to accept your offer. I have seen offers that are well below the asking price (or below another competing offer) get accepted because the sellers needed a longer/delayed closing to accommodate their own schedule ie the seller's new home won't be ready until some time further in the future. I always ask what an appropriate closing date is with the seller's agent because they are an important part of the offer. These can be amended prior to the closing date provided BOTH sides agree, so choose wisely.

Deposit:

A deposit shows goodwill that the buyer is serious and will execute on the details of the offer; a deposit also protects the seller should the deal fall through. There is no set deposit standard but typically a 3-5% deposit on the offer price shows the seller that you are a serious buyer (a 3% deposit on a $500,000 offer on a home would be $15,000). Many deposits can be $5,000-$10,000, depending on the value of the home. The higher your deposit is, the more appealing your offer may be to the seller, although, understandably, they are more focused on price during the offer presentation! Once your offer is accepted, your deposit will go toward your down payment on closing.

2)  OFFER ACCEPTANCE

Timing of providing the deposit:

Now that your offer has been accepted, you, as the buyer, must provide a bank draft, certified cheque or personal cheque (or other) for the deposit amount provided in your offer within 24 hrs of acceptance. Make sure you are careful with who it is payable to – on page 1 of the Agreement of Purchase and Sale. Note, this deposit will remain in trust (insured and safe) with the seller’s brokerage until closing.  If the buyer does not fulfill all obligations within the offer document in the timing specified, the buyer will likely lose the deposit. Although this is rare, and I have never been involved in a transaction where this has happened it is noteworthy to mention. Remember that the offer is a legal contract between buyer and seller.

Remove Conditions in the Offer:

Depending on the conditions within the offer now is the time to satisfy yourself as the buyer that you can and want to proceed with the offer. For example, if your offer is "conditional on financing" now is the time to arrange your financing condition with your bank (see my last blog on pre-qualification vs pre approval). You will need to get final commitment/approval from your financial institution that you have financing ready to go. If you have "conditional on inspection" within your offer now is the time to organize an inspection on the home and satisfy yourself that you want to proceed. Once you are satisfied with the outcome of all the buyer conditions within the offer you can sign off (firm up) on the conditions and your offer is now "firm". At this point, as stated above regarding your deposit, you are now legally obligated to close, and if not you may lose your deposit and go into litigation with the seller (no one wants that!). During the "Acceptance" stage of an offer I always stay very involved with my clients and provide assistance and guidance with timelines, things to do and provide constant communication with the seller’s agent in order to provide a seamless and hassle free transition to closing. I often have conversations with my fellow professional Realtors about the dangers and costly mistakes that happen with "sale by owner" transactions at because there are so many moving parts to navigate. A Realtor is your trusted advisor and guide during this stressful and confusing time. If I had a nickel for every time clients ask ‘so now what do I do, again?’ and I am always there during those moments of what feels like a crisis. A calming influence and assurance of what needs to be done.

3)  FIRM UP THE OFFER

Now that you have signed off (firmed up) on all your conditions now is the time to get busy!!! I have a moving checklist to help you with this but now is the time to reach out to your lawyer, let me know who you are using, movers, utility companies, cable, internet provider, post office, etc. Within the offer I always recommend ask how many additional visits to the property you want before closing. This is a good time to measure for furniture, bring in your trades for quotes on any on any changes/upgrades you would like to have and to get one last look at your new home before closing (final walk-through).

4) CLOSING

Move in date :) Your lawyer will now have all the necessary information for closing (I take care of sending documents to them) and will look after all of the necessary property title transfer, closing details (pay the seller, pay land transfer tax, reconcile property tax adjustments, utilities etc).  Once the lawyer has finalized all expenses and transfers you will get a call indicating its time to pick up your keys.

Now it’s time to coordinate with the mover, inform friends and family and enjoy the anticipation of your new family home where you will make wonderful memories for years to come.

I hope this was helpful and visit my blog regularly on my website for further content. Happy house hunting!

Best, Sue