Chances are, when you find a home you absolutely love, someone else may love it too. So it’s important to act quickly and make an educated offer based on a rational approach to pricing and negotiating that you and I have discussed. To start the process rolling, I will draw up a contract that includes your offering price and other terms and conditions. Buyers often focus on price, but there are other important terms to a real estate contract. You can include any terms you like, but the more you add, the more likely the seller is to object. Here are the most common elements of a real estate contract:
Price — The market will determine the final price, but your agent will help you formulate an offer based on comparable listings and sales, and current market conditions.
Mortgage Condition — A mortgage "subject to" clause stipulates that you will buy the home subject to obtaining a mortgage. If you cannot obtain a mortgage, and the seller will not agree to finance the sale, then the contract will be null and void. The terms of the mortgage must be stated in the contract, and you will also need to establish a timeframe for securing financing.
Home Inspection Condition — A thorough inspection of the property by a licensed home inspector protects you against structural or material problems that are not detectable in a casual walk-through. Home inspections are just as important in new construction as they are in resale. Obviously, buyers can’t inspect a home that isn’t built yet, but they can request an inspection prior to closing. In new construction, an inspector will make sure that all mechanical systems are working properly. They may also spot repairs that need to be added to the builder’s punch list (a list of items that need to be completed before the home is delivered to the buyer). The buyer, not the seller, is responsible for hiring and paying the inspector.
Attorney Approval — Even if you are using a standard-form real estate contract, an attorney’s review is always recommended. It is also recommended that you use an attorney that specializes in real estate transactions. Something that is obvious to a real estate attorney might be overlooked by an attorney that isn’t familiar with real estate transactions or real estate contracts. Upon attorney review, if the contract is not acceptable to either party, both have the option to cancel. If the contract is acceptable, then the transaction moves forward.
Deposit Money — This money is a deposit, given by the buyer to the seller, which secures the contract until the closing. An initial deposit, usually in the form of a bank draft, must be given to the buyer's agent along with the contract, and the balance of the deposit money is usually due upon attorney approval. Deposit money is typically held by the buyer's agent's brokerage (Macdonald Realty Ltd.) in a trust account until the closing, when it may be applied to the down payment and/or closing costs. If the sale does not go through due to conditions covered within the contract, then the deposit money may be returned to the buyer. However, if a buyer is in breach of contract, then a seller may be entitled to keep all or a portion of the deposit money.
Important Dates in a Real Estate Transaction
There are four important dates in a real estate transaction. They are the Acceptance Date, Subject Removal Date, the Completion Date, and the Possession Date. They can be set a day apart from each other or a year apart, but they must come in the order that you see them below.
The Acceptance Date
The first is the date of acceptance. This is when the buyer and seller agree to a price and conditions. Most offers are conditional, meaning the buyers agree to buy if they are satisfied with the conditions of the home, the documentation associated with the home, and any other conditions in the contract. The buyer is usually given a week to satisfy their conditions, but this can depend on the deal.
Subject Removal Date
The end of the conditional period when the buyer removes the conditions from their offer is referred to as the “Subject Removal Date” (conditions are sometimes referred to as subjects). This is the next important date for a real estate transaction. By removing the conditions the buyer agrees to pay the purchase price on the Completion Date unconditionally. It is the buyer’s responsibility to get a building inspection, inspect the property’s documentation, finalize their financing, and fulfill any other conditions before the Subject Removal Date. If the buyer does not fulfill these conditions or remove the subjects, the deal will collapse.
Completion Date
This is the date when the buyer pays the purchase price and becomes the registered owner of the home. It is also the date when the seller receives the purchase price and gives up ownership of the property. The buyer DOES NOT MOVE IN ON THE COMPLETION DATE.
Possession Date
Move in day starts from 12 o’clock noon on the Possession Date. The sellers have to have all of their belongings out of the property and the buyers can move in and make use of their new home.
Making a counteroffer on a home? We can help you negotiate.
In many transactions, there is a fair amount of negotiation – offers and counteroffers – before both parties are satisfied. This is one aspect of a real estate transaction in which an agent is invaluable. Not only can an agent draw upon his or her experience and market knowledge to offer sound advice during a negotiation, but he or she can also serve as a buffer between the buyer and the seller/seller’s agent. Negotiating for a home can be a highly charged and emotional process. But the most emotional buyer will look like one cool customer behind the right agent, and in the end, you usually wind up with what’s important to you.
"The right agent can make all the difference in the world!"
