You may want to read the previous chapter on finding out and negotiating the price for your new home here.
Getting over the hurdle
Official Purchase Offers
When you proceed to making an official offer, make sure it clearly states all the important points and conditions in writing. Your offer to purchase document is known in Ontario as an Agreement of Purchase and Sale. A well-written Agreement should not lack the following:
- the price you offer for the house,
- a fairly detailed breakdown of what is to be included in the sale (such as appliances, furniture, doors, fixtures, etc.),
- the terms upon which the sale is contingent, such as secured financing, satisfactory results of a home inspection, a successful sale of your current home if applicable, etc.,
- disclosure provisions to ensure that you know of any defects in the home, protecting you in case something breaks after the offer has been accepted,
- the treatment of closing costs, i.e. who pays them and in what amount,
- seller’s concessions, if any,
- a smaller deposit tendered immediately towards the down payment (typically no less than 5% of the price) to show your true interest,
- a suggested closing date,
- an expiry date that requires the seller to decide whether they take the offer or not (a short expiry date will force the seller to make a decision in a haste, which might be positive for you as a buyer).
Once you’ve prepared all of the above, you submit the offer to the seller and wait. If you want to pay less than the asking price, propose other terms that will make your offer more attractive to the seller, such as a speedy closing with no conditions.
Calculator pen and agenda in black organizer case by Horia Varian
Once he or she reviews the offer, the seller lets you know whether he or she accepts it or rejects it. The seller may even write a counter-offer derived from your initial offer and send it back to you for reconsideration. This process may repeat itself, but, with any luck, will resolve one way or another within a few days.
Don’t worry, however. Although this is serious negotiation, the agreement is not binding until both parties actually accept and sign the contract.
Special Financing Options
In most cases, you will not have saved up enough money to purchase a home for your own cash. Therefore, a mortgage obtained from a lender and insured by CMHC (if necessary) is the usual approach to financing.
Since we’ve covered some of the specifics of funding the home purchase in the usual ways already, why not look at a couple of more exotic ways to finance your home purchase? Remember to ask your Realtor® to help you investigate all the possibilities:
- In some cases, you might not be able (or willing) to take out standard mortgage from the bank. If this is the case, ask the seller if he or she would consider seller financing. It is a long shot, but if the seller is not short on cash, he or she may find this a good investment option. Should you proceed with such an arrangement, hire a real estate attorney to write down the financing contract for you. This will guarantee that the contract is legal and fair to both you and the seller.
- An option not so distant from mortgages is called mortgage assumption. In this scenario, you would take over the seller’s remaining mortgage payments. This option is more reasonable when you yourself actually don’t have to take out mortgage, as opposed to an alternative to it.
- If you don’t want to afford to furnish the entire house anew, you might ask the seller to leave all the necessary appliances and furniture behind for you and sell it to you as a part of the house. The cost of the furniture will thus be wrapped in the price of the home and you can in turn finance it with the mortgage (as opposed to out-of-pocket purchases later). This option is especially useful to you as a buyer if you think you will be short on cash after the purchase, because you would have to find another means of financing these subsequent purchases.
Now that you are familiar with the details of purchase offers (a.k.a. Agreements of Purchase and Sale), you are ready to prepare for closing your purchase agreement.
