The Basics of Making an Offer

January 16, 2008 · Filed Under St. John's Condos, St. John's General and St. John's Real Estate 

A written contract is the foundation of a real estate transaction. Oral agreements are not legally enforceable when it comes to the sale of real estate. Therefore, you need to enter into a written contract, which starts with an Agreement of Purchase and Sale.
The Newfoundland and Labrador Association of Realtors have standard purchase agreements and your Realtor will help you put together a written, legally binding offer that reflects the price as well as terms and conditions that are right for you. Your Realtor will guide you through the offer, counteroffer, negotiating and closing processes.

What is in an Offer?

The purchase offer you submit, if accepted as it stands, will become a binding sales contract. So it’s important that the purchase offer contains all the items that will serve as a “blueprint for the final sale.”

The purchase offer includes items such as:

  • address and the legal description of the property
  • sale price
  • seller’s promise to provide clear title (ownership)
  • possession date for closing (the actual sale)
  • amount of deposit accompanying the offer and how it’s to be returned to you if the offer is rejected - or kept as damages if you later back out for no good reason
  • provisions about who will pay for survey and real property report
  • Property Disclosure Statement
  • a provision that the buyer may make a final walk through inspection of the property just before the closing
  • a time limit (preferably short) after which the offer will expire
  • contingencies, which are an extremely important matter and that are discussed in detail below

Contingencies - “Subject to” Clauses

If your offer says “this offer is subject to a certain event,” you’re saying that you will only go through with the purchase if that event occurs. Here are two common contingencies contained in a purchase offer:

  • The buyer obtaining specific financing from a lending institution: If the loan can’t be found, the buyer won’t be bound by the contract.
  • A satisfactory Home Inspection: for example, “within 4 days after acceptance of the offer.” The seller must wait 4 days to see if the inspector submits a report that satisfies the buyer. If not, the contract would become void. Again, make sure that all the details are explicitly stated in the written contract.

The Deposit

This is a deposit that you give when making an offer on a house to show “good faith.” A real estate company usually holds the deposit in a trust account. This will become part of your down payment.

The Vendor’s Response to Your Offer

You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance.

If the seller likes everything except the sale price, or the proposed closing date, or some of the applicances you want left with the property, you may receive a written Counter Offer including the changes the seller prefers. You are then free to accept it, reject it or even make another offer.

Each time either party makes any change in the terms, the other side is free to accept, reject or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side’s proposal.

Buyers: Withdrawing an Offer

Can you take back an offer? In most cases the answer is yes, right up until the moment it is accepted. If you do want to revoke your offer, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You don’t want to lose your deposit or find yourself being sued for damages the seller may have suffered by relying on your actions.

Counteroffers

When the Vendor receives a purchase offer from a would-be buyer, remember that unless you accept it exactly as it stands, unconditionally, the buyer is free to walk away. Any change you, the Vendor, makes in a counteroffer puts you at risk of losing that chance to sell.

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